Can you please help me solve 1)D, 6, 7, 8, & 9

6) Compare your answers from (4) and (5) for each respective portfolio. What relationship would you expect to see between betas and risk premiums? Do the numbers agree with your intuition?

7. First, look up and read about the "Small Firm January Effect" in your textbook. Next, look for evidence of a January Effect in the data. Specifically, for each of the three stock portfolios, calculate the average monthly risk premium for the month of January over the sample

period. Also calculate the average monthly risk premium for these three portfolios over the

Feb-Dec eleven-month period of the year. Comment on what you observe for each portfolio in

the month of January as opposed to the non-January months.

8. Sheet 2 of the workbook contains data on the five assets analyzed above, as well as twelve

additional assets, over the period 1995-2018. The added assets are: real estate, oil, gold,

timber, venture capital, private equity, hedge funds (energy, emerging markets, macro, and

distress), the Europe Australia Far East index of international stocks (EAFE), and high-yield

corporate bonds.

a. Compute the arithmetic mean return for each of the seventeen assets as well as T-bills.

Sort the mean returns from highest to lowest and create a column graph, with labels.

How do the returns of the twelve new assets compare to the five traditional U.S. stock

and bond portfolios over this time period?

b. Compute the correlation matrix for the seventeen assets, filling in the upper triangle of

the matrix. Which asset shows the highest correlation with energy hedge funds? Which

asset shows the highest correlation with real estate returns? Extract the column of

correlations for LRGSTK, sort these correlations from highest to lowest, and create a

column graph, with labels. Suppose we consider a correlation of 0.70 to be "high." Which

assets have a high correlation with large U.S. stocks and which have a low correlation?

c. Pick one of the seventeen assets and create a graph that illustrates the growth of a dollar

invested in the asset over 1995-2018. For comparison, on the same graph illustrate the

growth of a dollar invested in the composite U.S. stock market series (MARKET) over

this time period. (Use a line graph.)

9. Sheet 3 of the workbook contains monthly stock price data for Widgets Our Way Inc. (WOW).

Use the prices to create a series of monthly returns.

a. Compute the arithmetic mean monthly return. Annualize this number, assuming

monthly compounding. The average annual return on the U.S. stock market was 9.4%

over this time period. If the risk of WOW were similar to that of the market, would this

seem to be a good performing stock based on this return?

b. Create a line graph of the stock price data. Based on this graph, was WOW stock a good

investment over this period of time (1995-2018)?

c. Compute the geometric mean monthly return. Annualize this number, assuming monthly

compounding. Based on this return, would this seem to be a good performing stock?

d. Which of the two means, arithmetic or geometric, gives an accurate indication of this

stock's performance over this period of time? Can you explain the discrepancy between

the two measures?