Assignment 2

FI 8090

Part 1:

Microsoft Technology Peer Groups are listed as follows:

MSFT Technology Peer Group	Ticker
Accenture	ACN
Adobe Systems	ADBE
Amazon	AMZN
Apple	AAPL
Cisco Systems	CSCO
Google	GOOGL
Hewlett-Packard	HPQ
IBM	IBM
Intel	INTC
Oracle	ORCL
Research In Motion	BBRY
SAP	SAP
Symantec	SYMC
Yahoo	YHOO

Obtain time series of daily quotes from 2001-01-02 to 2015-12-31 for the above stocks along with Microsoft and perform the following tasks:

Compute daily returns for the MSFT and the peer group stocks for the given period. Provide mean, variance and standard deviation of daily return for all the stocks. Construct correlation and covariance matrix that displays correlation and covariance between each pair of stocks. On the basis of daily return for the given sample period, cluster the stocks into and 4 groups. Identify the stocks MSFT is clustered with for the given sample period. Construct K-Means Clusters (using and 4) on the basis of Debt-to-Equity ratio for the above stocks based on last four years ratios. Debt-to-equity ratio is measured as: Total Debt divided by Total Equity. Both are obtained from balance sheet financial statement. Note that while constructing the clusters you have to consider all four years of Debt-to-Equity ratio for the stocks.

One of the measures of short term solvency of firms is Current Ratio, which is computed as: Total Current Asset divided by Total Current Liabilities. Both are obtained from balance sheet financial statement. Construct K-Means Clusters (using and 4) on the basis of Current Ratio for the above stocks based on last four years ratios. Note that while constructing the clusters you have to consider all four years of Current Ratio for the stocks.

Deliverables:

• Submit R code for each sections of the assignment. R code should provide comments on sections of the assignment the code is intended for. Submit electronically. Note that this is a group submission. (90% of grade)