Exercise

# Compute dynamic stock Beta

Suppose Elon Musk is your idol and you are considering investing in some Tesla stocks. As a shrewd portfolio manager, you decide to do due diligence by checking Tesla stock Beta over the years. Beta is a measure of a stock's volatility in relation to the market, which can serve as a gauge of investment risks.

Recall you need the stock volatility, market (S&P 500 as a proxy) volatility and their return correlation to compute Beta. Correlation can be computed from standardized residuals.

Model fitted volatility has been preloaded for Tesla in `teslaGarch_vol`

, and for S&P 500 in `spGarch_vol`

. In addition, model standardized residuals are preloaded in `teslaGarch_resid`

and `spGarch_resid`

respectively.

Instructions

**100 XP**

Compute the correlation coefficient between Tesla and S&P 500 using standardized residuals from fitted GARCH models (

`teslaGarch_resid`

,`spGarch_resid`

).Compute Tesla stock Beta using Tesla volatility (

`teslaGarch_vol`

), S&P 500 volatility (`spGarch_vol`

) and`correlation`

computed from the previous step.