What is Beta?

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,╬▓ , 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. ┬áLet 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.

If you followed this blog there are more to follow-Amy

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.