ESTIMATING STOCK BETA (MSFT)

| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |
SUMMARY OUTPUT

Month
1/30/1998
2/27/1998
3/31/1998
4/30/1998
5/29/1998
6/30/1998
7/31/1998
8/31/1998
9/30/1998
10/30/1998
11/30/1998
12/31/1998
1/29/1999
2/26/1999
3/31/1999
4/30/1999
5/28/1999
6/30/1999
7/30/1999
8/31/1999
9/30/1999
10/29/1999
11/30/1999
12/31/1999
1/31/2000
2/29/2000
3/31/2000
4/28/2000
5/31/2000
6/30/2000
7/31/2000
8/31/2000
9/29/2000
10/31/2000
11/30/2000
12/29/2000
1/31/2001
2/28/2001
3/30/2001
4/30/2001
5/31/2001
6/29/2001
7/31/2001
8/31/2001
9/28/2001
10/31/2001
11/30/2001
12/31/2001

Return of Return of
MSFT
S&P 500
0.15426
0.01015
0.13615
0.07045
0.05605
0.04995
0.00698
0.00908
-0.05895
-0.01883
0.27782
0.03944
0.01442
-0.01162
-0.12735
-0.14580
0.14723
0.06240
-0.03805
0.08029
0.15230
0.05913
0.13678
0.05638
0.26183
0.04101
-0.14214
-0.03228
0.19400
0.03879
-0.09275
0.03794
-0.00769
-0.02497
0.11774
0.05444
-0.04851
-0.03205
0.07866
-0.00625
-0.02161
-0.02855
0.02208
0.06254
-0.01637
0.01906
0.28231
0.05784
-0.16167
-0.05090
-0.08685
-0.02011
0.18881
0.09672
-0.34353
-0.03080
-0.10305
-0.02192
0.27872
0.02393
-0.12734
-0.01634
0.00000
0.06070
-0.13608
-0.05348
0.14197
-0.00495
-0.16697
-0.08007
-0.24401
0.00405
0.40778
0.03464
-0.03378
-0.09229
-0.07309
-0.06420
0.23886
0.07681
0.02111
0.00509
0.05522
-0.02500
-0.09329
-0.01077
-0.13809
-0.06411
-0.10307
-0.08172
0.13641
0.01810
0.10421
0.07518
0.03177
0.00757

Return of
Risk Free
0.00419
0.00427
0.00436
0.00394
0.00381
0.00392
0.00395
0.00391
0.00336
0.00296
0.00370
0.00366
0.00367
0.00376
0.00380
0.00371
0.00368
0.00370
0.00371
0.00375
0.00375
0.00364
0.00381
0.00425
0.00449
0.00443
0.00488
0.00439
0.00390
0.00469
0.00490
0.00520
0.00493
0.00502
0.00510
0.00481
0.00402
0.00418
0.00369
0.00312
0.00287
0.00285
0.00303
0.00281
0.00198
0.00174
0.00144
0.00136

Month
1/30/1998
2/27/1998
3/31/1998
4/30/1998
5/29/1998
6/30/1998
7/31/1998
8/31/1998
9/30/1998
10/30/1998
11/30/1998
12/31/1998
1/29/1999
2/26/1999
3/31/1999
4/30/1999
5/28/1999
6/30/1999
7/30/1999
8/31/1999
9/30/1999
10/29/1999
11/30/1999
12/31/1999
1/31/2000
2/29/2000
3/31/2000
4/28/2000
5/31/2000
6/30/2000
7/31/2000
8/31/2000
9/29/2000
10/31/2000
11/30/2000
12/29/2000
1/31/2001
2/28/2001
3/30/2001
4/30/2001
5/31/2001
6/29/2001
7/31/2001
8/31/2001
9/28/2001
10/31/2001
11/30/2001
12/31/2001

Excess Return of Excess Return of

MSFT
S&P 500
0.15007
0.00596
0.13188
0.06618
0.05169
0.04559
0.00304
0.00514
-0.06276
-0.02264
0.27390
0.03552
0.01047
-0.01557
-0.13126
-0.14971
0.14387
0.05904
-0.04101
0.07733
0.14860
0.05543
0.13312
0.05272
0.25816
0.03734
-0.14590
-0.03604
0.19020
0.03499
-0.09646
0.03423
-0.01137
-0.02865
0.11404
0.05074
-0.05222
-0.03576
0.07491
-0.01000
-0.02536
-0.03230
0.01844
0.05890
-0.02018
0.01525
0.27806
0.05359
-0.16616
-0.05539
-0.09128
-0.02454
0.18393
0.09184
-0.34792
-0.03519
-0.10695
-0.02582
0.27403
0.01924
-0.13224
-0.02124
-0.00520
0.05551
-0.14101
-0.05841
0.13695
-0.00997
-0.17207
-0.08517
-0.24882
-0.00076
0.40376
0.03062
-0.03796
-0.09647
-0.07678
-0.06789
0.23574
0.07369
0.01824
0.00222
0.05237
-0.02785
-0.09632
-0.01380
-0.14090
-0.06692
-0.10505
-0.08370
0.13467
0.01636
0.10277
0.07374
0.03041
0.00621

Regression Statistics
Multiple R
0.650456087
R Square
0.423093121
Adjusted R Square
0.413146451
Standard Error
0.112534693
Observations
60

Cell M18 contains the

standard error for our
estimate of Microsoft's beta.

ANOVA
df
Regression
Residual
Total

1
58
59

SS
MS
F
Significance F
0.538680309 0.538680309 42.53615607 1.85277E-08
0.734515312 0.012664057
1.273195621

Coefficients
Standard Error
0.020990
0.014558
1.755793
0.269212

Intercept
S&P 500

Alpha
Beta

MSFT
2.10%
1.76

t Stat
1.441856
6.521975

P-value
0.154721
0.000000

Lower 95%
-0.008150
1.216908

Upper 95%
Lower 95.0% Upper 95.0%
0.050131
-0.008150
0.050131
2.294679
1.216908
2.294679

<== The amount MSFT returned in excess of CAPM prediction during the average month in the sample period
<== The desired beta estimate

1/31/2002
2/28/2002
3/28/2002
4/30/2002
5/31/2002
6/28/2002
7/31/2002
8/30/2002
9/30/2002
10/31/2002
11/29/2002
12/31/2002

-0.03834
-0.08429
0.03377
-0.13348
-0.02583
0.07445
-0.12285
0.02293
-0.10880
0.22245
0.07874
-0.10368

-0.01557
-0.02077
0.03674
-0.06142
-0.00908
-0.07246
-0.07899
0.00488
-0.11001
0.08644
0.05707
-0.06033

0.00144
0.00131
0.00149
0.00145
0.00154
0.00144
0.00141
0.00144
0.00145
0.00141
0.00141
0.00107

1/31/2002
2/28/2002
3/28/2002
4/30/2002
5/31/2002
6/28/2002
7/31/2002
8/30/2002
9/30/2002
10/31/2002
11/29/2002
12/31/2002

-0.03978
-0.08560
0.03228
-0.13493
-0.02737
0.07301
-0.12426
0.02149
-0.11025
0.22104
0.07733
-0.10475

-0.01701
-0.02208
0.03525
-0.06287
-0.01062
-0.07390
-0.08040
0.00344
-0.11146
0.08503
0.05566
-0.06140