PART III. MEASURING STOCK PERFORMANCE This part of the project enables you to analyze the risk and return charac particular stock that you own or would like to purchase. You should input your dat ne Excel or an alternative electronic spreadsheet. Perform the following tasks. of a. Obtain stock price data at the end of each of the last 16 quarters, and fill in tha information in Column A of your electronic spreadsheet. Historical stock price data ae available on the Yahoo! finance website and on other websites. Your professor may offer some suggestions on where to obtain this information. b. Obtain the data on dividend per share for this firm for each of the last 16 input that information in Column B of your electronic spreadsheet. When you obtain dia dend data, recognize that the dividend is often listed on an annual basis. In this the annual dividend by 4 to obtain the quarterly dividend. c. Use "compute" statements to derive the quarterly return on your stock in Column C of your electronic spreadsheet. The return on the stock during any quarter is as follows. First, compute the stock price at the end of that quarter minos at the end of the previous quarter, then add the quarterly dividend, and then divide by the stock price at the end of the previous quarter ck d. Input the S&P 500 stock index level as of the end of each of the 16 quarters in Column D of your electronic spreadsheet. e. Use "compute" statements to derive the quarterly stock market return in Column E which is equal to the percentage change in the S&P 500 index level from the previous quanter f. Using the tools in an electronic package, run a regression analysis in which your quarterh stock return (Column C) represents the dependent variable and the stock market return (Column E) represents the independent variable. This analysis can be easily run by Exce Based on your regression results, what is the relationship between the market returm and your stock's return? (The slope coefficient represents the estimate of your firm's beta, which is a measure of its systematic risk.) Based on your regression results, does it appear that there is a significant relationship between the market return and your stock's return? (The t-statistic for the slope coceficinst can be assessed to determine whether there is a significant relationship) i. Based on your regression results, what proportion of the variation in the stock's returs can be explained by movements (returns) in the stock market overall? (The R-SQUARED statistic measures the proportion of variation in the dependent variable that is explined the independent variable in a regression model like the one described previously)Dosi appear that the stock's return is driven mainly by stock market movements or by other facion that are not captured in the regression model? i. What is the standard deviation of your stocks guarterly returns over the 16-quarter period? (You can easily compute the standard deviation of your column of stock retun data by using a "compute" statement.) What is the standard deviation of the quartery stock market returns (as measured by quarterly returns on the S&P 500 index) ove 16-quarter period? Is your stock more volatile than the stock market in general do you think it is more volatile than the market? k. Assume that the average risk-free rate per quarter over the16-quarter peno cent. Determine the Sharpe index for your stock. (The Sharpe index is equial ion average quarterly return, minus the average risk-free rate, divided by the sitananor inde of your stock's returns.) Determine the Treynor index for your stock. (Then equal to your stock's average quarterly return, minus the average risk free rate. estimated beta of your stock.)
