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(Solution Library) Financial economists define a security’s systematic risk (i.e., risk that is related to the market m’s risk) as β = cov(x, m) / var(m) where

Question: Financial economists define a security’s systematic risk (i.e., risk that is related to the market m’s risk) as $\beta $ = cov(x, m) / var(m) where x = (the rate of return on a security - the risk free rate) and m = (the rate of return on market - the risk free rate). In other words, firms with $\beta $ > 1 may be thought as "aggressive" stocks, and $\beta $ < 1 as more "conservative" stocks than the total market. In worksheet Question 2 are the 5 years of monthly data for two securities and the total market (m).

Calculate the correlation coefficient between American Can and Martin Marietta.
Calculate the $\beta $ value for American Can.

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(Solution Library) Financial economists define a security’s systematic risk (i.e., risk that is related to the market m’s risk) as β = cov(x, m) / var(m) where

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