The project A Go to Bloomberg Lab of College of Business. B. Choose a sample of 10 stocks from the US Market and download the daily stock prices data of these 10 stocks over the period from 1-Jan-2020 to 30-May-2020. Also download data of index prices of S&P 500, risk-free rate (3-months US Treasuries) and Famma-French (3, 4, 5) factors over the same period. C. Now you are required to use Excel for the following: 1. Compute the daily stock returns for each of the stock using stock prices data, 2. Compute the Arithmetic mean returns of each stock and interpret it. Are mean and median of stock returns of each stock equal? Compute variance, standard deviation, skewness, and kurtosis of stock returns for cach of the stock. Test the normality of the stock retums of each of the stocks. Compute the pair-wise correlation between the stock returns answer the following questions based on this correlation table: a. If you want to construct a diversified portfolio, which stocks will you choose? b. Which of these stocks will you choose during good times, if you don't care about diversification but maximization of the returns? 4 c. Which of these stocks will you choose during bad times, if you don't care about diversification but maximization of the retums? 5. Now use the returns of the 10 stocks to compute the equally weighted daily portfolio returns and test the hypothesis that mean portfolio returns - 3.5%, against the alternative that mean portfolio returns #3.5%. Interpret the result. 6. Compute the risk premium using index returns and risk-free retums, compute the correlation between risk premium and stock returns and test whether this correlation is significant 7. Make a scatter plot using daily portfolio returns as dependent variable and risk premium as independent variable. According to the graph do you believe that a straight line could fit the data. 8. Now write the simple linear regression of daily portfolio returns on the risk premium estimate the simple regression equation and report the results along with the sample size and R-squared. How do you interpret the error term in the above regression? 9. Interpret the intercept and coefficient on risk premium; and find the predicted portfolio return when risk premium is 8%. Is this a reasonable prediction? Explain what is happening here. 10. How much of the variation in stock returns is explained by risk premium? Is this a lot in your opinion? 11. Test the hypothesis that Population Coefficient of risk premium-0. against the alternative that Population Coefficient of risk premium #0. Interpret the result. 12. Suggest some of the variables that can explain the stock returns, but they are not in this regression equation. 13. Now in the above regression use the dummy variable of lockdowns over the period from 20-March-2020 to 20-April-2020 to see if risk-premium has a different effect on portfolio returns during lockdowns. 14. Download the Famma-French (3.4.5) factors and run the multiple linear regression of daily portfolio returns on Famma-French factors and interpret the results. The project A Go to Bloomberg Lab of College of Business. B. Choose a sample of 10 stocks from the US Market and download the daily stock prices data of these 10 stocks over the period from 1-Jan-2020 to 30-May-2020. Also download data of index prices of S&P 500, risk-free rate (3-months US Treasuries) and Famma-French (3, 4, 5) factors over the same period. C. Now you are required to use Excel for the following: 1. Compute the daily stock returns for each of the stock using stock prices data, 2. Compute the Arithmetic mean returns of each stock and interpret it. Are mean and median of stock returns of each stock equal? Compute variance, standard deviation, skewness, and kurtosis of stock returns for cach of the stock. Test the normality of the stock retums of each of the stocks. Compute the pair-wise correlation between the stock returns answer the following questions based on this correlation table: a. If you want to construct a diversified portfolio, which stocks will you choose? b. Which of these stocks will you choose during good times, if you don't care about diversification but maximization of the returns? 4 c. Which of these stocks will you choose during bad times, if you don't care about diversification but maximization of the retums? 5. Now use the returns of the 10 stocks to compute the equally weighted daily portfolio returns and test the hypothesis that mean portfolio returns - 3.5%, against the alternative that mean portfolio returns #3.5%. Interpret the result. 6. Compute the risk premium using index returns and risk-free retums, compute the correlation between risk premium and stock returns and test whether this correlation is significant 7. Make a scatter plot using daily portfolio returns as dependent variable and risk premium as independent variable. According to the graph do you believe that a straight line could fit the data. 8. Now write the simple linear regression of daily portfolio returns on the risk premium estimate the simple regression equation and report the results along with the sample size and R-squared. How do you interpret the error term in the above regression? 9. Interpret the intercept and coefficient on risk premium; and find the predicted portfolio return when risk premium is 8%. Is this a reasonable prediction? Explain what is happening here. 10. How much of the variation in stock returns is explained by risk premium? Is this a lot in your opinion? 11. Test the hypothesis that Population Coefficient of risk premium-0. against the alternative that Population Coefficient of risk premium #0. Interpret the result. 12. Suggest some of the variables that can explain the stock returns, but they are not in this regression equation. 13. Now in the above regression use the dummy variable of lockdowns over the period from 20-March-2020 to 20-April-2020 to see if risk-premium has a different effect on portfolio returns during lockdowns. 14. Download the Famma-French (3.4.5) factors and run the multiple linear regression of daily portfolio returns on Famma-French factors and interpret the results