$1.$ Go to finance.yahoo.com and download the ending monthly stock prices for Teledyne Technologies $($TDY$)$for the last $60$ months. Be sure to use the adjusted closing price to account for any stock splits and

dividend payments. Next, download the ending value of the S&P $500$ index over the same period.

For the historical risk$-$free rate, go to the Federal Reserve Bank of St$.$ Louis website $($www$.$stlouisfed.org$)$ and find the three$-$month Treasury bill constant maturity rate. Download this file. What are the monthly returns, average monthly returns, and standard deviations for Teledyne Technologies stock, the three$-$month Treasury bill, and the S&P $500$ for this period?

$2.$ Beta is often estimated by linear regression. A model often used is called the market model,

which is:

Rt $$ Rft $=\backslash$alpha i $+\backslash$beta i

$[$RMt $$ Rft$]+\backslash$epsi t

In this regression, Rt is the return on the stock and Rft is the risk$-$free rate for the same period. RMt is the return on a stock market index such as the S&P $500$ index. $\backslash$alpha i$,$ is the regression intercept,

and $\backslash$beta i is the slope $($and the stock$$s estimated beta$).\backslash$epsi t represents the residuals for the regression. What do you think is the motivation for this particular regression? The intercept, $\backslash$alpha i$,$ is often called Jensen$$s alpha. What does it measure? If an asset has a positive Jensen$$s alpha, where would it plot with respect to the SML$?$ What is the financial interpretation of the residuals in the

regression?

$3.$ Use the market model to estimate the beta for

FLIR Systems using the last $60$ months of returns

$($the regression procedure in Excel is one easy

way to do this$).$ Plot the monthly returns on FLIR

Systems against the index and also show the

fitted line.

$4.$ Compare your beta for Teledyne Technologies to the beta

you find on finance.yahoo.com. How similar are

they? Why might they be different?