Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

FINA3010 HW2: Empirical analysis - CAPM application (Due on Nov 27) Try your best even if you camot get right beta, this is a real-life

image text in transcribed
FINA3010 HW2: Empirical analysis - CAPM application (Due on Nov 27"") Try your best even if you camot get right beta, this is a real-life application for what we learned. Opwnload the historical stock price data of a firm you can choose any firm you like) and 5&P500 (which is the average market price) from Yahoo finance or other public source. Download the dairy yield of 1 year (US T-bill rate) from the Department of US Treasury. You could choose any length of period, but it must be longer than three months. Using those data to estimate the CAPM beta of the firm you choose and clearly state your CAPM model equation. I Upload the EXCEL worksheet and your explanation or other work that you think helps. Hint: To solve the CAPM, you should gets firm rate of return, n= market rate of return, t=risk- free rate or T-bill rate. Then use those rates to run regression in excel and find the beta. And return of stock on time tn A-where P is the stock price.) For example: You want to estimate Market risk (beta) for Lululemon in using current year (2020) data Before you are starting, you should get the three types of data (in bold) Lululemon stock daily price from 2020/01/01 to 2020/11/01, S&P 500 daily price (market price) from 2020/01/01 to 2020/1101; 1-year T-bill rate from 2020/01/01 to 2020/11/01. As we need to find stock return and market return for CAPM model, so we need to use the daily price to find daily retum Return on 2020.01.02 = 100. Price on 2020.01.02 - Price on 2020.01.01 Price on 2020.01.01 Keep solving, you will get the stock return and market return from 2020/01/02 to 2020/11/01 (As the year T-bill rate is the rate of return in percentage format. To keep consistent daily stock or market return should time 100) For now you will have stock return (Buwa), market return Reww) and T-bill return (Bus) in same format According to the CAPM Ri - Ref +(Rm - Rub Beta. If we want to find beta, we need run the regression between RiRif and Rm-Ruf So creating two columns, one is another 397 words FINA3010 HW2: Empirical analysis - CAPM application (Due on Nov 27"") Try your best even if you camot get right beta, this is a real-life application for what we learned. Opwnload the historical stock price data of a firm you can choose any firm you like) and 5&P500 (which is the average market price) from Yahoo finance or other public source. Download the dairy yield of 1 year (US T-bill rate) from the Department of US Treasury. You could choose any length of period, but it must be longer than three months. Using those data to estimate the CAPM beta of the firm you choose and clearly state your CAPM model equation. I Upload the EXCEL worksheet and your explanation or other work that you think helps. Hint: To solve the CAPM, you should gets firm rate of return, n= market rate of return, t=risk- free rate or T-bill rate. Then use those rates to run regression in excel and find the beta. And return of stock on time tn A-where P is the stock price.) For example: You want to estimate Market risk (beta) for Lululemon in using current year (2020) data Before you are starting, you should get the three types of data (in bold) Lululemon stock daily price from 2020/01/01 to 2020/11/01, S&P 500 daily price (market price) from 2020/01/01 to 2020/1101; 1-year T-bill rate from 2020/01/01 to 2020/11/01. As we need to find stock return and market return for CAPM model, so we need to use the daily price to find daily retum Return on 2020.01.02 = 100. Price on 2020.01.02 - Price on 2020.01.01 Price on 2020.01.01 Keep solving, you will get the stock return and market return from 2020/01/02 to 2020/11/01 (As the year T-bill rate is the rate of return in percentage format. To keep consistent daily stock or market return should time 100) For now you will have stock return (Buwa), market return Reww) and T-bill return (Bus) in same format According to the CAPM Ri - Ref +(Rm - Rub Beta. If we want to find beta, we need run the regression between RiRif and Rm-Ruf So creating two columns, one is another 397 words

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Finance Theory And Policy

Authors: Paul Krugman, Maurice Obstfeld, Marc Melitz

12th Global Edition

1292417005, 978-1292417004

More Books

Students also viewed these Finance questions

Question

How can you develop media literacy?

Answered: 1 week ago