I could never remember the formula for the coeficient of an independent variable (ie. b-hat) until I thought of it in tearms of Beta. Quiz: Who can tell me why?
they are the same. Independent var = X, Dependent = Y Cov(X,Y)/Var(X) = Coefficient Market=Independent var, Dependent=Return on Security or Asset Cov(Ra,Rm)/VAR(Rm) = Beta.
That is correct! I’m not sure if this was just an easy question (it was CPK who answered - he can answer anything!), But the equation for the coefficient of an indep. var. was (for some reason) difficult for me to remember. That is, until I was thinking about beta while reading PM and it just came to me - “Hey, that formula for beta looks alot like the one I can’t remember!” So I thought I would share.