Calculating Beta Using Market Model Regression (Slope)

While calculating the cost of equity, it is important for an analyst to calculate the beta of the company’s stock.

Beta of a publicly traded company can be calculated using the Market Model Regression (Slope).

In this method, we regress the company’s stock returns (ri) against the market’s returns (rm). The beta (β) is represented by the slope of the regression line.

$r_{i}=\alpha +\beta r_{m}$

Where,

r_i is the stock’s return

α represents the intercept

β is the stock’s beta