(Regression, Sharpe, Jensen’s alpha, Treynor) Consider the following data:

a. Compute the excess returns for the S&P 500 and for IBM.

b. Show by graph the excess return of IBM against those of the S&P 500.

Use Excel to compute the regression line and the R2

.

c. Does IBM have excess performance over the S&P 500?

d. Is IBM an aggressive or a defensive stock?

e. Calculate the Sharpe ratio, Jensen’s alpha, and Treynor ratio for IBM.

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A 1 B IBM AND S&P 500 D S&P total IBM 1-year 23456788 Year return Return T-bill 3 2002 -23.37% -35.46% 2.17% 2003 26.38% 20.50% 1.32% 5 2004 8.99% 7.19% 1.26% 6 2005 3.00% -15.83% 2.75% 7 2006 13.62% 19.77% 4.38% 8 2007 3.53% 12.84% 5.00% 9 2008 -38.49% -20.78% 3.34% 10 2009 23.45% 58.64% 0.37% 11 2010 12.78% 14.26% 0.47% 12 2011 0.00% 27.41% 0.29% 13 2012 13.41% 5.92% 0.12% 14 2013 29.60% -0.18% 0.16% 15 2014 11.39% -12.39% 0.13%