Problem A1. Pick any two stocks, corresponding market index, and download their respective daily prices, and calculate the simple returns for the three assets. Data set has to include at least 252 observation, but there is no upper limit for the observation period. Provide the descriptive statistics, including the mean, variance, standard deviation, skewness, and kurtosis, and comment on the differences between these three assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Problem A2. Plot the original returns and their respective moving averages (30-day window) for each asset. Comment on the difference between these two time series for each assets, and between the assets. Also, propose an optimal trading strategy having in mind moving-average dynamics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Problem A3. Plot the distribution of the returns using histogram and kernel density plot. Comment on the shape of the distri- bution, and make a comparison between the distribution of returns for the three assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Problem A4. Download some risk-free rate and add it to the data set. Estimate the CAPM for each stock, and provide your interpretation of the results, by emphasizing the difference in the estimated results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Problem A5. Plot the Security Market Line (SML) for each stock, and interpret the results (intuition, comparison, etc.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART B: French-Fama Factor Model (15 pts.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Problem B1. Download data for any two industry portfolio from Keneth R. French data library (Online Data Library), and corresponding factors and risk-free rate. Data set should include at least 252 observation, but there is no upper limit for the number of observation. Provide the descriptive statistics for this data set (mean, variance, standard deviation, skewness, kurtosis), and comment on the differences between the two industry portfolios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Problem B2. Plot the distribution of returns using histogram and kernel density plot. Comment on the shape of the distribution, and compare the distribution of returns for the two industry portfolio of your choice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Problem B3. Estimate the three-factor French-Fama model for each industry portfolio, and interpret the results (goodness-of-fit, significance, the meaning of the estimated coefficients, etc.).