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Beta, stocks, enron

1. Pick out a stock (you may wish to use: http://www.yahoo.com, company/key statistics, for example Microsoft http://finance.yahoo.com/q/ks?s=MSFT) and look up its Beta. What does that Beta tell you about the stock? Does it correlate to what you would expect? Why?

2. How has the Internet changed the way stocks are traded? What has been the benefit of this change? What is the downside?

3. As a result of the Enron scandal, Sarbanes Oxley was enacted. Do you expect this to help or hurt investor confidence?

4. To what extent would betas have investors during the 1990s bull market?

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1. Pick out a stock (you may wish to use: http://www.yahoo.com, company/key statistics, for example Microsoft http://finance.yahoo.com/q/ks?s=MSFT) and look up its Beta. What does that Beta tell you about the stock? Does it correlate to what you would expect? Why?

Beta is a measure of a stock's price volatility relative to the overall market. It is most often calculated using a stock's movements relative to the S&P 500 Index over the trailing 12-month period.

A stock with a beta of 1.00 will tend to move higher and lower in tandem with the S&P 500. Securities with a beta greater than 1.00 tend to be more volatile than the S&P 500, and those with betas below 1.00 tend to be less volatile than the underlying index. Securities with betas of zero generally move independently of the overall market. And finally, stocks with negative betas tend to move in the opposite direction relative to the broader market. When the S&P tumbles, stocks with negative betas will move higher, and vice versa.

source: http://www.streetauthority.com/terms/b/beta.asp

We will chose the stock Google (Symbol: GOOG), which has a beta of 1, which leads us to believe that the stock will move in tandem with the S&P 500. And infact, the movement of the google's stock in the last 1 year has been in tandem with the movement of the S&P 500 ( http://finance.yahoo.com/q/ta?t=1y&s=GOOG&l=on&z=m&q=l&c=&c=%5EGSPC)

2. How has the Internet changed the way stocks are traded? What has been the benefit of this change? What is the downside?

Internet has certainly revolutionized the way the stocks are being traded in the sense that it has allowed investors to trade by themselves, sitting in the comforts of their offices or homes, without the help of any broker executing transactions on behalf of them. This autonomy and flexibility to the retail investors has resulted in benefits as well as disadvantages. The key benefit is that it has increased market participation as people can ...

Solution Summary

Pick out a stock (you may wish to use: http://www.yahoo.com, company/key statistics, for example Microsoft http://finance.yahoo.com/q/ks?s=MSFT) and look up its Beta. What does that Beta tell you about the stock? Does it correlate to what you would expect? Why?

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