Can some one please tell me which variables I have to plot in in order to obtain alpha and beta?

Question

I assume I have to plot the periodic prices of a share against the values of the relevant index. Then I would get the equation
Share price = alpha + beta x index value

Is that correct?

Answer 1

No.

You need to regress the excess return of the asset against the excess return of the market.

To get the excess return, divide the value by the previous period's value minus one -- then subtract the return on the risk-free rate.

Many people regress returns against returns -- which gives a good approximation (especially if interest rates haven't changed much).

It has to be returns -- values (prices) will not give a meaningful result.

Answer 2

Gosh, you make investing sound so difficult.
Do you want to own your own hedge fund???

Buy a good stock (blue chip) rising value, rising dividend, and keep it.

Answer 3

http://www.fundmanagersoftware.com/help/def_alpha_calculation.html

http://faculty.babson.edu/academic/Beta/CalculateBeta.htm