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Date 200401 200402 200403 200404 200405 200406 200407 200408 200409 200410 200411 200412 200501 200502 200503 200504 200505 200506 200507 200508 200509 200510 200511 200512

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Date 200401 200402 200403 200404 200405 200406 200407 200408 200409 200410 200411 200412 200501 200502 200503 200504 200505 200506 200507 200508 200509 200510 200511 200512 200601 200602 200603 200604 200605 200606 200607 200608 200609 200610 200611 200612 200701 200702 200703 200704 200705 200706 200707 200708 200709 200710 200711 200712 200801 AMGN 0.0464 -0.0175 -0.0847 -0.0299 -0.0303 -0.0024 0.0423 0.0424 -0.0418 -0.0002 0.0570 0.0685 -0.0298 -0.0101 -0.0552 0.0000 0.0751 -0.0339 0.3194 0.0016 -0.0029 -0.0508 0.0702 -0.0256 -0.0757 0.0355 -0.0362 -0.0694 -0.0016 -0.0349 0.0687 -0.0241 0.0514 0.0612 -0.0642 -0.0384 0.0302 -0.0868 -0.1304 0.1478 -0.1199 -0.0205 -0.0280 -0.0675 0.1289 0.0272 -0.0492 -0.1595 0.0032 AMZN -0.0422 -0.1466 0.0063 0.0074 0.1124 0.1217 -0.2846 -0.0200 0.0713 -0.1647 0.1626 0.1162 -0.0242 -0.1860 -0.0259 -0.0557 0.0973 -0.0682 0.3645 -0.0543 0.0609 -0.1201 0.2158 -0.0270 -0.0494 -0.1647 -0.0243 -0.0361 -0.0170 0.1176 -0.3048 0.1465 0.0418 0.1859 0.0591 -0.0218 -0.0454 0.0390 0.0166 0.5413 0.1273 -0.0106 0.1481 0.0174 0.1657 -0.0429 0.0158 0.0230 -0.1613 STX -0.1376 0.0650 -0.0676 -0.2244 -0.0120 0.1732 -0.2051 -0.0418 0.2370 -0.0651 0.1899 0.1529 -0.0203 0.0656 0.0879 -0.1008 0.2116 -0.1730 0.1037 -0.1394 -0.0446 -0.0858 0.3112 0.0566 0.3047 0.0219 -0.0090 0.0087 -0.1178 -0.0304 0.0247 -0.0375 0.0378 -0.0221 0.1453 0.0287 0.0260 -0.0070 -0.1338 -0.0494 -0.0659 0.0573 0.0799 0.1025 -0.0093 0.0923 -0.0736 -0.0112 -0.2012 MSFT 0.0102 -0.0405 -0.0603 0.0481 0.0038 0.0888 -0.0025 -0.0390 0.0128 0.0116 0.0686 -0.0034 -0.0165 -0.0396 -0.0393 0.0468 0.0229 -0.0372 0.0310 0.0722 -0.0603 -0.0012 0.0802 -0.0553 0.0765 -0.0423 0.0127 -0.1125 -0.0584 0.0287 0.0326 0.0719 0.0642 0.0497 0.0261 0.0170 0.0335 -0.0839 -0.0107 0.0743 0.0284 -0.0398 -0.0163 -0.0055 0.0254 0.2495 -0.0842 0.0595 -0.0843 BA -0.0093 0.0429 -0.0530 0.0394 0.0775 0.1155 -0.0067 0.0329 -0.0115 -0.0333 0.0776 -0.0336 -0.0226 0.0913 0.0635 0.0181 0.0778 0.0329 0.0002 0.0191 0.0139 -0.0487 0.0588 0.0301 -0.0275 0.0685 0.0721 0.0708 0.0012 -0.0161 -0.0548 -0.0287 0.0527 0.0128 0.1123 0.0035 0.0081 -0.0218 0.0189 0.0460 0.0854 -0.0440 0.0756 -0.0617 0.0857 -0.0610 -0.0578 -0.0549 -0.0489 WMT 0.0151 0.1060 0.0044 -0.0451 -0.0200 -0.0533 0.0047 -0.0040 0.0101 0.0135 -0.0345 0.0171 -0.0080 -0.0151 -0.0262 -0.0593 0.0051 0.0205 0.0239 -0.0859 -0.0254 0.0796 0.0264 -0.0332 -0.0147 -0.0163 0.0451 -0.0468 0.0797 -0.0058 -0.0762 0.0087 0.1029 -0.0008 -0.0645 0.0054 0.0327 0.0130 -0.0236 0.0207 -0.0021 0.0107 -0.0449 -0.0457 0.0005 0.0357 0.0595 -0.0031 0.0675 PFE 0.0368 0.0052 -0.0437 0.0203 -0.0070 -0.0300 -0.0677 0.0275 -0.0634 -0.0539 -0.0349 -0.0317 -0.1015 0.0960 -0.0008 0.0343 0.0339 -0.0115 -0.0392 -0.0313 -0.0200 -0.1294 -0.0161 0.1000 0.1012 0.0292 -0.0485 0.0165 -0.0565 -0.0080 0.1074 0.0696 0.0290 -0.0603 0.0405 -0.0578 0.0131 -0.0377 0.0120 0.0475 0.0499 -0.0698 -0.0806 0.0689 -0.0165 0.0074 -0.0228 -0.0434 0.0277 ABB 0.1476 0.0549 -0.0276 -0.0401 -0.0122 -0.0212 -0.0054 0.0417 0.0643 -0.0539 0.0674 -0.0841 -0.0265 0.1053 0.0181 0.0161 0.0397 -0.0122 0.0526 0.0705 0.0096 0.0584 0.1232 0.1109 0.1235 0.1035 0.0415 0.1331 -0.1059 0.0269 -0.0023 0.0317 -0.0120 0.1320 0.0912 0.1044 -0.0095 -0.0618 0.0281 0.1618 0.0856 0.0526 0.0650 0.0245 0.0637 0.1521 -0.0278 -0.0197 -0.1313 YHOO 0.0433 -0.0562 0.0931 0.0425 0.2135 0.1872 -0.1538 -0.0744 0.1894 0.0672 0.0395 0.0016 -0.0656 -0.0835 0.0505 0.0177 0.0783 -0.0685 -0.0378 -0.0006 0.0156 0.0925 0.0882 -0.0261 -0.1226 -0.0673 0.0062 0.0161 -0.0363 0.0446 -0.1776 0.0623 -0.1231 0.0419 0.0254 -0.0544 0.1085 0.0901 0.0139 -0.1039 0.0235 -0.0547 -0.1430 -0.0224 0.1809 0.1586 -0.1379 -0.1324 -0.1754 200802 200803 200804 200805 200806 200807 200808 200809 200810 200811 200812 200901 200902 200903 200904 200905 200906 200907 200908 200909 200910 200911 200912 201001 201002 201003 201004 201005 201006 201007 201008 201009 201010 201011 201012 201101 201102 201103 201104 201105 201106 201107 201108 201109 201110 201111 201112 201201 201202 201203 -0.0230 -0.0822 0.0022 0.0516 0.0711 0.3280 0.0035 -0.0570 0.0105 -0.0726 0.0398 -0.0502 -0.1079 0.0121 -0.0212 0.0303 0.0601 0.1770 -0.0406 0.0075 -0.1097 0.0509 0.0039 0.0338 -0.0320 0.0570 -0.0422 -0.0965 0.0158 0.0367 -0.0640 0.0797 0.0377 -0.0787 0.0419 0.0033 -0.0681 0.0413 0.0636 0.0649 -0.0362 -0.0626 0.0180 -0.0080 0.0420 0.0161 0.1088 0.0579 0.0065 -0.0006 -0.1703 0.1059 0.1028 0.0380 -0.1016 0.0410 0.0586 -0.0996 -0.2133 -0.2540 0.2009 0.1470 0.1015 0.1335 0.0964 -0.0314 0.0727 0.0251 -0.0533 0.1499 0.2726 0.1439 -0.0102 -0.0677 -0.0559 0.1467 0.0098 -0.0849 -0.1291 0.0790 0.0589 0.2582 0.0520 0.0616 0.0262 -0.0576 0.0215 0.0395 0.0870 0.0045 0.0397 0.0882 -0.0328 0.0046 -0.0126 -0.0994 -0.0998 0.1233 -0.0759 0.1270 0.0641 -0.0292 -0.0931 0.1351 -0.1069 -0.2112 -0.0040 -0.1871 -0.4414 -0.3604 0.0523 -0.1445 0.1425 0.3977 0.3577 0.0674 0.2009 0.1511 0.1503 0.0982 -0.0828 0.0846 0.2022 -0.0814 0.1915 -0.0829 0.0051 -0.1631 -0.1510 -0.0376 -0.1920 0.1612 0.2493 -0.0884 0.1208 -0.0685 -0.0929 0.1343 0.2357 -0.0465 -0.0381 -0.1405 -0.1533 -0.1127 0.5718 0.0700 -0.0409 0.2890 0.2540 0.0265 -0.1623 0.0434 0.0049 -0.0032 -0.0286 -0.0651 0.0653 -0.0220 -0.1634 -0.0887 -0.0386 -0.1204 -0.0480 0.1375 0.1029 0.0375 0.1379 -0.0105 0.0536 0.0434 0.0781 0.0653 0.0364 -0.0755 0.0220 0.0215 0.0426 -0.1508 -0.1081 0.1217 -0.0858 0.0437 0.0888 -0.0468 0.1050 -0.0066 -0.0355 -0.0448 0.0209 -0.0289 0.0396 0.0538 -0.0234 -0.0643 0.0699 -0.0319 0.0149 0.1375 0.0816 0.0162 0.0001 -0.1017 0.1411 -0.0199 -0.2060 -0.0701 0.0794 -0.1252 -0.0860 -0.1791 0.0009 -0.0084 -0.2470 0.1317 0.1256 0.1303 -0.0524 0.0096 0.1673 0.0902 -0.1173 0.1052 0.0328 0.1195 0.0492 0.1496 -0.0025 -0.1081 -0.0223 0.0859 -0.0967 0.0885 0.0616 -0.0913 0.0234 0.0647 0.0425 0.0267 0.0791 -0.0167 -0.0525 -0.0468 -0.0453 -0.0950 0.0873 0.0505 0.0678 0.0113 0.0163 -0.0077 -0.0227 0.0671 0.1006 0.0000 -0.0267 0.0431 0.0117 0.0139 -0.0681 0.0013 0.0075 -0.1595 0.0450 0.0636 -0.0326 -0.0077 -0.0261 0.0297 0.0253 -0.0350 0.0120 0.0980 -0.0152 -0.0004 0.0120 0.0339 -0.0353 -0.0518 -0.0492 0.0649 -0.0146 0.0674 0.0121 -0.0015 0.0026 0.0397 -0.0729 0.0084 0.0563 0.0110 -0.0377 -0.0081 0.0160 -0.0243 0.0929 0.0384 0.0208 0.0268 -0.0372 0.0426 -0.0325 -0.0606 -0.0392 -0.0214 -0.0976 0.0687 0.0407 -0.0351 -0.0396 -0.0542 0.0779 -0.1767 -0.1337 0.1064 -0.0191 0.1490 -0.0125 0.0620 0.0584 -0.0090 0.0290 0.0763 0.0011 0.0258 -0.0498 -0.0228 -0.0251 -0.0783 -0.0637 0.0519 0.0727 0.0792 0.0143 -0.0537 0.0742 0.0405 0.0670 0.0556 0.0325 0.0324 -0.0396 -0.0656 -0.0036 -0.0685 0.0894 0.0524 0.0782 -0.0111 -0.0026 0.0720 0.0008 0.0751 0.1393 0.0590 -0.1281 -0.0582 -0.0629 -0.2104 -0.3222 -0.0167 0.1609 -0.1306 -0.0766 0.1568 0.0201 0.1575 -0.0413 0.1866 0.0487 0.0454 -0.0753 -0.0092 0.0403 -0.0560 0.1237 0.0780 -0.1227 -0.1122 0.0159 0.1958 -0.0401 0.0903 -0.0204 -0.0643 0.1596 0.0543 0.0355 -0.0131 0.1364 0.0030 -0.0353 -0.0775 -0.1115 -0.1970 0.1013 0.0085 -0.0074 0.1062 -0.0163 -0.0039 0.4484 0.0414 -0.0525 -0.0237 -0.2280 -0.0373 -0.0256 -0.1073 -0.2590 -0.1022 0.0599 -0.0385 0.1279 -0.0317 0.1155 0.1085 -0.0114 -0.0856 0.0203 0.2190 -0.1072 -0.0585 0.1209 -0.1055 0.0200 0.0797 0.0000 -0.0720 -0.0978 0.0029 -0.0555 0.0809 0.1637 -0.0409 0.0515 -0.0307 0.0174 0.0171 0.0612 -0.0650 -0.0912 -0.1290 0.0389 -0.0323 0.1875 0.0045 0.0267 -0.0409 -0.0414 0.0263 201204 201205 201206 201207 201208 201209 201210 201211 201212 Mean 0.0462 -0.0173 0.0488 0.1329 0.0203 0.0044 0.0261 0.0309 -0.0293 0.0059 0.1451 -0.0819 0.0725 0.0217 0.0642 0.0244 -0.0843 0.0823 -0.0047 0.0221 0.1504 -0.2383 0.0555 0.2139 0.0769 -0.0328 -0.1172 -0.0699 0.2271 0.0188 -0.0074 -0.0820 0.0480 -0.0366 0.0526 -0.0344 -0.0410 -0.0594 0.0036 0.0045 0.0327 -0.0879 0.0674 -0.0052 -0.0280 -0.0253 0.0121 0.0608 0.0145 -0.0374 0.1240 0.0593 0.0676 -0.0192 0.0165 0.0165 -0.0400 -0.0471 0.0113 -0.0354 0.0517 0.0452 0.0017 0.0415 0.0008 0.0149 0.0024 -0.0755 -0.1249 0.0323 0.0631 -0.0017 0.0797 -0.0342 0.0753 0.0705 0.0210 -0.0193 0.0387 0.0006 -0.0751 0.0904 0.0538 0.1149 0.0602 Average Monthly Returns 0.0101 0.0049 0.0020 0.0187 0.0040 8 ABB 0.00 9 YHOO 0.00 Portfolio Weights Choose Number of stocks in the portfolio (starting from AMGAN): 1 # Stock Weight 1 AMGN 1.00 2 AMZN 0.00 3 STX 0.00 4 MSFT 0.00 5 BA 0.00 6 WMT 0.00 7 PFE 0.00 AAPL 0.0557 0.0603 0.1304 -0.0466 0.0884 0.1597 -0.0061 0.0665 0.1235 0.3523 0.2796 -0.0395 0.1941 0.1667 -0.0711 -0.1346 0.1026 -0.0742 0.1587 0.0994 0.1433 0.0742 0.1776 0.0600 0.0504 -0.0930 -0.0842 0.1223 -0.1509 -0.0418 0.1867 -0.0016 0.1346 0.0533 0.1305 -0.0744 0.0105 -0.0131 0.0981 0.0742 0.2143 0.0070 0.0796 0.0510 0.1082 0.2377 -0.0407 0.0870 -0.3166 VZ 0.0617 0.0399 -0.0467 0.0434 -0.0837 0.0466 0.0756 0.0184 0.0033 0.0027 0.0545 -0.0175 -0.1119 0.0107 -0.0131 0.0199 -0.0117 -0.0235 0.0025 -0.0444 -0.0006 -0.0237 0.0149 -0.0582 0.0646 0.0644 0.0107 -0.0184 -0.0551 0.0731 0.0219 0.0402 0.0554 0.0074 -0.0173 0.0658 0.0452 -0.0291 0.0139 0.0175 0.1401 -0.0542 0.0451 -0.0174 0.0573 0.0501 -0.0621 0.0111 -0.1014 GOOG 0.2660 0.4710 -0.0454 0.0594 0.0147 -0.0390 -0.0398 0.2188 0.2603 0.0609 -0.0217 -0.0061 0.1065 0.1759 0.0881 0.0246 0.0429 -0.1619 0.0755 0.0716 -0.1104 0.1278 -0.0781 -0.0209 0.0617 0.1853 0.0177 -0.0502 0.0891 -0.1038 0.0194 0.0289 0.0563 0.0498 -0.0243 0.0103 0.1010 0.2463 -0.0198 -0.0022 -0.1839 # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 Portfolio 0.0464 -0.0175 -0.0847 -0.0299 -0.0303 -0.0024 0.0423 0.0424 -0.0418 -0.0002 0.0570 0.0685 -0.0298 -0.0101 -0.0552 0.0000 0.0751 -0.0339 0.3194 0.0016 -0.0029 -0.0508 0.0702 -0.0256 -0.0757 0.0355 -0.0362 -0.0694 -0.0016 -0.0349 0.0687 -0.0241 0.0514 0.0612 -0.0642 -0.0384 0.0302 -0.0868 -0.1304 0.1478 -0.1199 -0.0205 -0.0280 -0.0675 0.1289 0.0272 -0.0492 -0.1595 0.0032 MKT-RF 0.0215 0.014 -0.0133 -0.0183 0.0118 0.0186 -0.0407 0.0008 0.0161 0.0143 0.0454 0.0343 -0.0275 0.0189 -0.0196 -0.0261 0.0365 0.0056 0.0392 -0.0122 0.0048 -0.02 0.0362 -0.0025 0.0304 -0.003 0.0146 0.0072 -0.0357 -0.0035 -0.0078 0.0203 0.0184 0.0323 0.0171 0.0087 0.0141 -0.0195 0.0068 0.0349 0.0324 -0.0196 -0.0374 0.0092 0.0323 0.018 -0.0482 -0.0086 -0.0635 RF 0.0007 0.0006 0.0009 0.0008 0.0006 0.0008 0.001 0.0011 0.0011 0.0011 0.0015 0.0016 0.0016 0.0016 0.0021 0.0021 0.0024 0.0023 0.0024 0.003 0.0029 0.0027 0.0031 0.0032 0.0035 0.0034 0.0037 0.0036 0.0043 0.004 0.004 0.0042 0.0041 0.0041 0.0042 0.004 0.0044 0.0038 0.0043 0.0044 0.0041 0.004 0.004 0.0042 0.0032 0.0032 0.0034 0.0027 0.0021 STOCK 0.0464 -0.0175 -0.0847 -0.0299 -0.0303 -0.0024 0.0423 0.0424 -0.0418 -0.0002 0.0570 0.0685 -0.0298 -0.0101 -0.0552 0.0000 0.0751 -0.0339 0.3194 0.0016 -0.0029 -0.0508 0.0702 -0.0256 -0.0757 0.0355 -0.0362 -0.0694 -0.0016 -0.0349 0.0687 -0.0241 0.0514 0.0612 -0.0642 -0.0384 0.0302 -0.0868 -0.1304 0.1478 -0.1199 -0.0205 -0.0280 -0.0675 0.1289 0.0272 -0.0492 -0.1595 0.0032 -0.0764 0.1478 0.2122 0.0851 -0.1129 -0.0507 0.0666 -0.3296 -0.0534 -0.1387 -0.0790 0.0560 -0.0091 0.1770 0.1970 0.0793 0.0487 0.1472 0.0295 0.1019 0.0170 0.0605 0.0541 -0.0886 0.0654 0.1485 0.1110 -0.0161 -0.0208 0.0227 -0.0550 0.1672 0.0607 0.0338 0.0367 0.0520 0.0409 -0.0133 0.0047 -0.0066 -0.0350 0.1633 -0.0145 -0.0091 0.0615 -0.0558 0.0597 0.1271 0.1883 0.1053 -0.0646 0.0036 0.0717 -0.0003 -0.0798 -0.0263 0.0317 -0.0863 -0.0611 0.1004 0.0383 -0.1053 -0.0449 0.0585 0.0199 -0.0356 0.0502 0.0586 -0.0321 -0.0248 -0.0068 0.0632 0.0531 -0.0976 -0.0167 0.0722 -0.0530 -0.0478 0.0182 0.1234 0.0162 0.1036 0.0116 -0.0145 0.1178 0.0092 0.0365 0.0439 -0.0071 -0.0225 0.0081 -0.0390 0.0248 0.0176 0.0185 0.0203 0.0633 -0.0489 0.0119 0.0031 -0.1650 -0.0652 0.3038 0.0200 -0.1014 -0.1001 -0.0221 -0.1355 -0.1028 -0.1848 0.0501 0.1004 -0.0016 0.0298 0.1376 0.0537 0.0105 0.0509 0.0420 0.0740 0.0812 0.0874 0.0634 -0.1452 -0.0059 0.0765 -0.0730 -0.0762 -0.0838 0.0897 -0.0718 0.1684 0.1672 -0.0945 0.0688 0.0108 0.0217 -0.0434 -0.0727 -0.0277 -0.0428 0.1922 -0.1039 -0.0479 0.1507 0.0114 0.0776 -0.1019 0.0657 0.0372 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 -0.0230 -0.0822 0.0022 0.0516 0.0711 0.3280 0.0035 -0.0570 0.0105 -0.0726 0.0398 -0.0502 -0.1079 0.0121 -0.0212 0.0303 0.0601 0.1770 -0.0406 0.0075 -0.1097 0.0509 0.0039 0.0338 -0.0320 0.0570 -0.0422 -0.0965 0.0158 0.0367 -0.0640 0.0797 0.0377 -0.0787 0.0419 0.0033 -0.0681 0.0413 0.0636 0.0649 -0.0362 -0.0626 0.0180 -0.0080 0.0420 0.0161 0.1088 0.0579 0.0065 -0.0006 -0.0309 -0.0094 0.046 0.0186 -0.0844 -0.0077 0.0153 -0.0924 -0.1723 -0.0786 0.0166 -0.0812 -0.1009 0.0895 0.1019 0.0521 0.0043 0.0772 0.0332 0.0408 -0.0259 0.0556 0.0275 -0.0336 0.034 0.0632 0.02 -0.0789 -0.0556 0.0692 -0.0477 0.0954 0.0388 0.006 0.0682 0.0201 0.0349 0.0048 0.029 -0.0127 -0.0175 -0.0234 -0.06 -0.076 0.1134 -0.0026 0.0074 0.0506 0.0443 0.0311 0.0013 0.0017 0.0018 0.0018 0.0017 0.0015 0.0013 0.0015 0.0008 0.0003 0.0009 0 0.0001 0.0002 0.0001 0 0.0001 0.0001 0.0001 0.0001 0 0 0.0001 0 0 0.0001 0 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0 0 0 0 0.0001 0 0 0 0 0 0 0 -0.0230 -0.0822 0.0022 0.0516 0.0711 0.3280 0.0035 -0.0570 0.0105 -0.0726 0.0398 -0.0502 -0.1079 0.0121 -0.0212 0.0303 0.0601 0.1770 -0.0406 0.0075 -0.1097 0.0509 0.0039 0.0338 -0.0320 0.0570 -0.0422 -0.0965 0.0158 0.0367 -0.0640 0.0797 0.0377 -0.0787 0.0419 0.0033 -0.0681 0.0413 0.0636 0.0649 -0.0362 -0.0626 0.0180 -0.0080 0.0420 0.0161 0.1088 0.0579 0.0065 -0.0006 -0.0260 -0.0107 0.0109 0.0458 0.0935 0.0028 -0.1076 -0.0124 -0.0907 0.0693 0.0312 0.0672 0.0270 -0.0487 0.0612 -0.0091 -0.0116 -0.0193 -0.0567 -0.0397 -0.0014 0.0912 0.0823 0.1013 -0.0983 0.0266 0.0129 0.0428 0.0084 0.0251 Sum of weights: 10 AAPL 0.00 11 VZ 0.00 1.00 12 GOOG 0.00 100 101 102 103 104 105 106 107 108 0.0462 -0.0173 0.0488 0.1329 0.0203 0.0044 0.0261 0.0309 -0.0293 -0.0084 -0.062 0.0388 0.0079 0.0256 0.0274 -0.0175 0.0077 0.0118 0 0.0001 0 0 0.0001 0.0001 0.0001 0.0001 0.0001 0.0462 -0.0173 0.0488 0.1329 0.0203 0.0044 0.0261 0.0309 -0.0293 Regression Choose Stock Number [1-12, 14]: STOCK-RF 0.0457 -0.0181 -0.0856 -0.0307 -0.0309 -0.0032 0.0413 0.0413 -0.0429 -0.0013 0.0555 0.0669 -0.0314 -0.0117 -0.0573 -0.0021 0.0727 -0.0362 0.3170 -0.0014 -0.0058 -0.0535 0.0671 -0.0288 -0.0792 0.0321 -0.0399 -0.0730 -0.0059 -0.0389 0.0647 -0.0283 0.0473 0.0571 -0.0684 -0.0424 0.0258 -0.0906 -0.1347 0.1434 -0.1240 -0.0245 -0.0320 -0.0717 0.1257 0.0240 -0.0526 -0.1622 0.0011 -0.0243 -0.0839 0.0004 0.0498 0.0694 0.3265 0.0022 -0.0585 0.0097 -0.0729 0.0389 -0.0502 -0.1080 0.0119 -0.0213 0.0303 0.0600 0.1769 -0.0407 0.0074 -0.1097 0.0509 0.0038 0.0338 -0.0320 0.0569 -0.0422 -0.0966 0.0157 0.0366 -0.0641 0.0796 0.0376 -0.0788 0.0418 0.0032 -0.0682 0.0412 0.0636 0.0649 -0.0362 -0.0626 0.0179 -0.0080 0.0420 0.0161 0.1088 0.0579 0.0065 -0.0006 0.0462 -0.0174 0.0488 0.1329 0.0202 0.0043 0.0260 0.0308 -0.0294 Regression Choose Stock Number 1 4. For this exercise you would need to use the spreadsheet ps2.xls posted on the Blackboard. The le contains information about monthly returns of twelve stocks, AMGN, AMZN, STX, MSFT, BA, WMT, PFE, ABB, YHOO, AAPL, VZ, GOOG, as well as the valueweighted market index excess return (MKTRF), and the riskfree rate (RF). The sample period begins on January 2004 and ends December 2012. The spreadsheet is set in a way that you would only need to change the values in cells H122 and T123 in order to control the portfolio weights and the stock/ portfolio chosen for the regression calculation. (6) (b) ((0 Calculate the Beta and R2 of each stock by running a regression of the monthly returns of the stock (excess of the riskfree rate) on the monthly returns of the valucheighted market index (excess of the riskfree rate ). The latter are denoted MKTRF and they are located on Column P (notice the riskfree rate has already been subtracted from the index). You can choose different stocks by changing the values in cell T123. This would immediately provide you with the excess returns of each stock in Column T. These returns should be used for the regression. Graph a scattered plot of the Security Market Line (SML), i.e. each point on this plot is a pair of the average returns of a stock and its Beta. Calculate the risk premium of the market index as the slope of the regression line in this graph. Is the premium statistically signicant? Are these results consistent with the CAPM? Calculate the amount of idiosyncratic risk as a fraction of total risk (1 R2) for ve portfolios. The rst portfolio includes only AMGN. The second portfolio includes the rst three stocks, i.e. AMGN, AMZN, and STX. Similarly, portfolios 3 through 5 include the rst six, nine, and twelve stocks, respectively. These portfolios can be chosen by changing the value of cell H122 (change also the value of T123 to 14 to run the regressions for this part). Plot the fraction of idiosyncratic risk as a function of the number of stocks in the port folio. What is your conclusion

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