Risk Management; Corporate Finance

You believe that the only relevant driver of the return of stock X is the return of the risky market portfolio.

Price data of stock X and of the market proxy are below, beginning in approximately row 239.

Price data are for the past 203 days.

Even though the price data is daily, most answers below should be annualized.

Part (A). What is the ANNUALIZED beta coefficient of this particular relationship? Part (B). What is the ANNUALIZED correlation coefficient between returns of these two risky assets? Part (C). What is the ANNUALIZED conditional mean return of stock X given DAILY returns of less than 1%? Part (D). What is the ANNUALIZED conditional mean return of the market portfolio given DAILY returns of less than 1%? Part (E). What is the maximum return of stock X, ANNUALIZED? Part (F). What is the minumum return of stock X, ANNUALIZED? Part (G). What is the ANNUALIZED F-statistic of your model? Part (H). You expect the market return to be 0.5% tomorrow. Let's assume that tomorrow, stock X announces and pays a dividend of 0.50 per share. (Assume that it's both announced and paid tomorrow.) What is the expected closing price of a share of stock X tomorrow? Part (I). What is the ANNUALIZED goodness of fit of your model, i.e., ANNUALIZED R?? Part (I). What is the test statistic (t-stat) for the ANNUALIZED beta coefficient? Part (K). What is the ANNUALIZED covariance between the two series of assets' returns? 5 points M X M Part (L). Plot the 204 DAILY (r", r ) pairs, with r" along the X-axis (independent axis) and along the Y-axis (dependent axis). Place the upper left corner of the plot in cell J235. 10 points Part (M). On the chart, place the DAILY best-fit line, its equation and the R? Note that rows 242:438 are hidden. Date, t -203 Pt (M) 2.22 2.22 -202 -201 Pt(x) 8.88 8.89 9.02 10.43 10.54 2.22 -3 2.51 -2 2.51 -1 2.52 2.51 10.48 10.35 0 Part (A). What is the ANNUALIZED beta coefficient of this particular relationship? Part (B). What is the ANNUALIZED correlation coefficient between returns of these two risky assets? Part (C). What is the ANNUALIZED conditional mean return of stock X given DAILY returns of less than 1%? Part (D). What is the ANNUALIZED conditional mean return of the market portfolio given DAILY returns of less than 1%? Part (E). What is the maximum return of stock X, ANNUALIZED? Part (F). What is the minumum return of stock X, ANNUALIZED? Part (G). What is the ANNUALIZED F-statistic of your model? Part (H). You expect the market return to be 0.5% tomorrow. Let's assume that tomorrow, stock X announces and pays a dividend of 0.50 per share. (Assume that it's both announced and paid tomorrow.) What is the expected closing price of a share of stock X tomorrow? Part (I). What is the ANNUALIZED goodness of fit of your model, i.e., ANNUALIZED R?? Part (I). What is the test statistic (t-stat) for the ANNUALIZED beta coefficient? Part (K). What is the ANNUALIZED covariance between the two series of assets' returns? 5 points M X M Part (L). Plot the 204 DAILY (r", r ) pairs, with r" along the X-axis (independent axis) and along the Y-axis (dependent axis). Place the upper left corner of the plot in cell J235. 10 points Part (M). On the chart, place the DAILY best-fit line, its equation and the R? Note that rows 242:438 are hidden. Date, t -203 Pt (M) 2.22 2.22 -202 -201 Pt(x) 8.88 8.89 9.02 10.43 10.54 2.22 -3 2.51 -2 2.51 -1 2.52 2.51 10.48 10.35 0