Examples of Computing OLS Beta, Sum Beta, and Full‐information Beta Estimates

Two commonly used methods of calculating beta estimates for a subject company are: (1) regressing returns for the public guideline companies against the returns of benchmark market index over the same periods (also known as ordinary least squares (OLS) regression of OLS beta estimates) and (2) regressing returns for the public guideline companies against the returns of benchmark market index over the same period and lagged returns of benchmark market index (also known as sum beta estimates). An alternative method for estimating a beta for a subject company is called “full‐information beta,” which involves selecting and analyzing guideline public companies that report segment data for businesses that are comparable to all or part of the subject company's business operations. OLS beta can be computed using many different Excel functions.