Project 1 for BFIN 357 spring semester 2022

This is the beta project, and it will require you to run 30 regressions and explain the results. Your basic research questions are the following: (1) What is market risk, how is it measured, and how is it used in the CAPM to estimate a companys required rate of return? (2) How is the market risk of a companys stock returns estimated? (3) How do the betas of companies in different industries compare? (4) How do betas of companies in the same industry compare? (5) Are company betas constant through time? You will both write a paper and produce a 3-5-minute video to discuss your work Following are the steps to take for the analysis: 1. Select five companies to analyze, not including IBM. Four of these companies must be from different industries, while the fifth company must be in the same industry as one of the other four. 2. Collect introductory descriptive information about each company including major business units and the industries in which each company operates. 3. Collect five years of daily stock price data, December 31, 2016 to December 31, 202, for all five companies, as well as for IWV (the iShares Russell 3000 portfolio) the market portfolio. 4. Estimate one beta for each of your five companies using all five years of data. Therefore, one regression per company for a total of five betas. 5. Estimate five betas for each company using rolling 1-year periods (about 252 trading days is one year). This will require you to run five regressions for each company for a total of twenty-five. 6. Your write-up will use the template in Week 4 of Brightspace, be 6-10 pages long, double-spaced and include at least the following: a. An introduction of your project, including your answers to the five research questions presented above. Assume your reader is intelligent but is not familiar with the following details. b. A short description (3-5 sentences) of your selected companies, including their industries. c. An explanation of your method in estimating beta including data collection, any data manipulation, and details about how you used the data to estimate beta. d. A more detailed explanation of the following statistics for just ONE of your 5-year regressions: R2, estimated alpha and beta and each of their t-statistics, and p-values. Be sure to write out the estimated regression equation and include a cut-and-pasted illustration of the Excel output for this single regression. This should be the only printout of a regression in your paper. After this explanation, you may assume the reader understands these statistics and can use them at will. e. General comparisons between estimated 5-year betas for the five companies including a discussion of why you think the betas for the companies are different from or similar to each other. Are the estimated betas statistically significant (can you reject the null)? Include a mention of the important statistics that support your conclusions on statistical significance. f. Comparisons of the five estimated 1-year betas for each of the five companies including a discussion about whether the estimated betas are constant through time. If not, are there similarities in the patterns of change between companies? Are the estimated betas statistically significant? Include discussion of statistics to support your conclusions. g. A conclusion in which you summarize your findings including and explain how they help you answer the research questions mentioned above. 7. Your presentation video will be 3-5 minutes and should be accompanied by a set of 3-5 PowerPoint presentation slides. Your presentation should be an overview of your paper. 8. Upload your written document onto Brightspaces dropbox under Beta project paper. 9. Upload your Excel workbook onto Brightspaces dropbox under Beta project Excel workbook. 10. Either email a link to your video presentation or upload it onto Brightspaces dropbox under Beta project presentation.

Anything helps!