Risk and Retum 183 TABLES Estimating beta from probabilistic predictions o 2 @ © o Event Probability — Excess Return Excess Return =@)x6) on Security i (%) on the ‘Market Portflio (6) a 10 180 130 18 » 20 130 00 26 © 10 80 no a 30 “80 “60 24 ° 30 25.0 180 75 103 Expected return on security oO a (8) ® ao) =(2)x() Deviation of Deviation of Weighted Weighted Excess Excess Return Deviation for Products Returron am the Market Market Portio. of security i Portflio squared Deviations =G)-103 =(@-60 = 0) x65 =Q)x Ox) 13 77 70 49 539 00 27 60 72 324 1 23 5.0 25 15 18 183 “20 432 65.88 54 47 120 432 5292 60 1010 119.80 fBpscted excess Variance of Covariance between tum on the excess return on the excess return on rket portfolio the market portfolio security ‘and the excess return on the ‘market portiolio Pin = 1280. 1186 1010 2.0 = 9.0% + 2.0 (11.0% ~ 9.0%) = 13% B 1.0 = 9.0% + 1.0 (11.0% ~ 9.0%) = 11% B2.0 = 9.0% + 0.5 (11.0% ~ 9.0%) = 10%