Business Case Studies & Business Publications

Waite First Securities

Bodily, Samuel E.

Case

Waite First Securities

Bodily, Samuel E.

QA-0453 | Published January 31, 1994 | 8 pages Case

Collection: Darden School of Business

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An account executive has the task of calculating a beta value for three stocks of interest to an important client, based on five years of monthly total returns. The client is interested in these beta values as measures of the riskiness of the three investments. This case is best used near the beginning of a module on regression. It focuses on the simple linear regression model relating equity returns to market returns. This use of regression (to calculate a stock's beta) is very common in financial analyses and will be seen by the students in other courses. The case serves to clarify the distinction between systematic and unsystematic risk and between R-squared and the standard deviation of residuals as measures of forecasting uncertainty.