Beta (Bae-tah). The word, “beta”, reminds me of the betta fish. Or magnetic rays or something. The last thing on my mind is an equation with the greek letter symbol,β , which represents the slope of the regression model. Beta represents the relationship between the x and y variable. The value associated with Beta represents how much Y changes with one unit change in X.

 

How do you calculate Beta? If you have your X and Y values its pretty methodical. I won’t go into the details here. There are plenty of links that run through example calculations.  Let me be the first to tell you, nobody and I mean no one calculates their beta estimates by hand in the real world. First of all you have over a hundred data points, it’s just not feasible to generate all of those calculations before lunch-time. Beta estimates can be calculated automatically using statistical programs. Calculations in class are suppose to help you familiarize yourself with the concept.

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