INVESTMENT & PORTFOLIO ANALYSIS ASSIGNMENT

Pick any four stocks from the pool of S&P 500. Make sure all four stocks belong to four different industries. You will estimate the CAPM for each of the chosen stocks.

While answering the following, do not report the computation procedure such as data or your EXCEL/VBA/MATLAB CODE, unless stated otherwise.

a)Compile the 60 recent monthly (not annualized) returns of the chosen stocks, and the monthly T-bills rates for the same period. Also, collect the (not-annualized) index return of S7P 500 for the same period. Run the regression model with this data without annualizing the data. Report the alpha and beta estimates.

b)Interpret each estimate of alpha and beta. Take the smallest/largest beta among the four. Explain why it is the smallest by relating the firm/industry characteristics. (Note: Sometimes, it may not make sense, though.)

c)Use the first 30 months only and run the regression. Report the alpha and beta estimates.

d)Use the last 30 months only and run the regression. Report the alpha and beta estimates.

e)Are the three sets of estimates identical?