I have to calculate the beta for a US company and for a German company in 2005. For the US one, I used the return of the S&P 500 index plus dividends. My problem is that the S&P 500 index is a price index whereas the German DAX index is a performance index. There exists data for the DAX as a price index but I cannot find data on dividend payments. So, what should I do regarding the German company's beta? Should I take the return on the performance index or price index?

Question

anonymous · Answer

Beta is a regression on the index.  For every 10% the broad market increases the stock "X" will increase by this amount.  Therefore I don't believe the index composition matters as long as the company you are valuing is apart of that specific index.

anonymous · Answer

to calculate the beta you don´t need the dividends, you have to compare the return of the index and the return of the stock you are going to value, you can use excel and apply the formula:

Cov  Return Sotck.Market  /  var   Return of the market