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3. (20 Points) Pick 5 stocks from the US market and running a regression with historical data, find their stock betas. Assume that CAPM holds
3. (20 Points) Pick 5 stocks from the US market and running a regression with historical data, find their stock betas. Assume that CAPM holds and calculate the required rates of return for each of the 5 stocks. Assume also that US Treasury Bonds yield is 2% and the US market risk premium is 6%. Then calculate the expected return and beta of the portfolio that is formed by equal weights of the 5 stocks. (Hint: You may find stock return data information at Yahoo Finance (https://finance.yahoo.com) or any other web site you may know. Use 5 years of monthly or 52 weeks of weekly return data to calculate betas. You may use, if you like, S&P500 index as a proxy for the market portfolio. Please clearly provide the web links that you used.) 3. (20 Points) Pick 5 stocks from the US market and running a regression with historical data, find their stock betas. Assume that CAPM holds and calculate the required rates of return for each of the 5 stocks. Assume also that US Treasury Bonds yield is 2% and the US market risk premium is 6%. Then calculate the expected return and beta of the portfolio that is formed by equal weights of the 5 stocks. (Hint: You may find stock return data information at Yahoo Finance (https://finance.yahoo.com) or any other web site you may know. Use 5 years of monthly or 52 weeks of weekly return data to calculate betas. You may use, if you like, S&P500 index as a proxy for the market portfolio. Please clearly provide the web links that you used.)
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