This assignment will involve analyzing the returns of Costco (COST). monthly prices for COST from 10/1/2013 to 10/1/2018

COST

Date	Open	High	Low	Close	Adj Close	Volume
2013-10-01	115.11	118.99	110.15	118	103.8425	42905200
2013-11-01	118.71	126.12	118.55	125.43	110.3811	31793400
2013-12-01	125.66	125.69	115.85	119.02	105.006	43396100
2014-01-01	118.71	119.3	111.13	112.36	99.13019	54683000
2014-02-01	112.96	117.47	109.5	116.8	103.0474	41383300
2014-03-01	116.22	117.07	111.15	111.68	98.79658	54850200
2014-04-01	112.21	116.61	110.36	115.68	102.3352	51977100
2014-05-01	115.68	116.91	111.61	116.02	102.6359	40532600
2014-06-01	115.84	118.85	114.51	115.16	102.1871	33693000
2014-07-01	115.54	119.6	114.9	117.54	104.299	39082200
2014-08-01	117.8	122.06	117.11	121.08	107.7659	32829300
2014-09-01	121	127.78	120.9	125.32	111.5397	39512400
2014-10-01	125.25	134.5	122.05	133.37	118.7045	56709800
2014-11-01	133.82	142.97	133.37	142.12	126.4923	33458700
2014-12-01	143.32	146.82	136.55	141.75	126.4906	46520400
2015-01-01	141.87	146.1	138.22	142.99	127.5971	42032800
2015-02-01	144	156.85	140.13	146.96	131.1397	61001700
2015-03-01	147.32	154.23	145.78	151.5	140.0052	48699300
2015-04-01	151.83	152.95	142.54	143.05	132.1964	39575300
2015-05-01	143.46	147.56	141.53	142.59	132.1318	40746500
2015-06-01	143.05	143.25	134.73	135.06	125.1541	43412100
2015-07-01	135.79	147	135.06	145.3	134.643	40333900
2015-08-01	145.78	147.59	117.03	140.05	129.7781	43359500
2015-09-01	137.58	146.9	137.5	144.57	134.3349	39045800
2015-10-01	144.85	159.4	142.19	158.12	146.9256	46298200
2015-11-01	158.99	164.47	153.23	161.42	149.992	39890700
2015-12-01	162.02	169.73	157.33	161.5	150.4541	54507800
2016-01-01	159.81	161.23	144.91	151.12	140.7841	48503700
2016-02-01	150.84	154.88	141.62	150.03	139.7686	54336400
2016-03-01	150.4	159.8	147.1	157.58	147.2003	51289900
2016-04-01	157.87	159.09	147.46	148.13	138.3727	42763900
2016-05-01	148.76	153.88	138.57	148.77	139.3816	69410800
2016-06-01	150.5	158.79	148.55	157.04	147.1297	55933500
2016-07-01	157.19	168.82	154.67	167.22	156.6673	43053800
2016-08-01	167.15	169.59	161.15	162.09	151.861	34012900
2016-09-01	159	159.28	147.2	152.51	143.2696	60622100
2016-10-01	152.22	152.32	147.1	147.87	138.9108	46439300
2016-11-01	148.48	153.42	142.11	150.11	141.0151	51221500
2016-12-01	150.11	164.95	150.11	160.11	150.8721	48187800
2017-01-01	160.65	164.8	158.51	163.95	154.4906	36709000
2017-02-01	163.84	177.87	161.81	177.18	166.9572	48179100
2017-03-01	177.37	178.71	164.1	167.69	158.4404	58812800
2017-04-01	167.74	178.27	166.11	177.52	167.7282	36635400
2017-05-01	178.5	183.18	169.06	180.43	170.4776	53726300
2017-06-01	180.81	182.72	156.56	159.93	157.6721	1.11E+08
2017-07-01	160.21	161.35	150	158.51	156.2721	93217800
2017-08-01	159.1	162.35	150.06	156.74	154.5272	78721800
2017-09-01	157.59	165.32	155.03	164.29	162.4884	50198600
2017-10-01	164.92	167.29	154.11	161.08	159.3136	89106400
2017-11-01	161.97	184.9	161.29	184.43	182.4075	57900700
2017-12-01	183.26	195.35	181.13	186.12	184.6253	60835900
2018-01-01	187.23	199.88	183.88	194.87	193.305	57450200
2018-02-01	193.41	195.52	175.79	190.9	189.3669	43370500
2018-03-01	191.31	192.99	180.83	188.43	187.4169	57402100
2018-04-01	186.91	199.04	180.94	197.16	196.1	44178400
2018-05-01	196.49	201.77	190.18	198.24	197.1741	43119500
2018-06-01	195.45	212.46	195	208.98	208.4625	44832300
2018-07-01	208.42	224.62	206.05	218.71	218.1684	36353800
2018-08-01	218.65	233.52	215.01	233.13	232.5527	41228200
2018-09-01	233.14	245.16	231.51	234.88	234.88	41975400
2018-10-01	235.81	237.57	217.79	218.82	218.82	15747500

SPY

Date	Open	High	Low	Close	Adj Close	Volume
2013-10-01	168.14	177.51	164.53	175.79	159.2703	2.9E+09
2013-11-01	176.02	181.75	174.76	181	163.9907	1.93E+09
2013-12-01	181.09	184.69	177.32	184.69	167.334	2.23E+09
2014-01-01	183.98	184.94	176.88	178.18	162.3124	2.53E+09
2014-02-01	177.97	187.15	173.71	186.29	169.7002	2.39E+09
2014-03-01	184.65	189.02	183.75	187.01	170.356	2.55E+09
2014-04-01	187.62	189.7	181.31	188.31	172.297	2.35E+09
2014-05-01	188.22	192.8	186.01	192.68	176.2954	1.78E+09
2014-06-01	192.95	196.6	191.97	195.72	179.0769	1.68E+09
2014-07-01	196.2	199.06	192.97	193.09	177.5168	1.89E+09
2014-08-01	192.56	200.82	190.55	200.71	184.5223	1.83E+09
2014-09-01	200.97	201.9	196.05	197.02	181.1299	2.11E+09
2014-10-01	196.7	201.82	181.92	201.66	186.2625	3.94E+09
2014-11-01	201.92	207.87	200.06	207.2	191.3795	1.57E+09
2014-12-01	206.4	212.97	197.86	205.54	189.8461	3.05E+09
2015-01-01	206.38	206.88	198.55	199.45	185.2379	3.17E+09
2015-02-01	200.05	212.24	197.86	210.66	195.6491	1.89E+09
2015-03-01	210.78	212.06	204.12	206.43	191.7205	2.72E+09
2015-04-01	206.43	212.48	204.51	208.46	194.4699	2.02E+09
2015-05-01	209.4	213.78	206.76	211.14	196.97	1.88E+09
2015-06-01	211.94	213.34	205.28	205.89	192.0723	2.53E+09
2015-07-01	207.73	213.18	204.11	210.45	197.2817	2.45E+09
2015-08-01	210.46	211.31	182.4	199.16	186.6981	4.32E+09
2015-09-01	193.12	202.89	186.93	191.59	179.6018	3.24E+09
2015-10-01	192.08	209.44	189.12	208.89	196.8379	3.21E+09
2015-11-01	208.32	211.66	202.18	208.69	196.6495	1.92E+09
2015-12-01	209.44	211	199.83	203.87	192.1075	2.91E+09
2016-01-01	200.49	201.9	181.02	193.72	183.6292	3.71E+09
2016-02-01	192.53	196.68	181.09	193.56	183.4775	2.91E+09
2016-03-01	195.01	206.87	194.45	205.52	194.8145	2.32E+09
2016-04-01	204.35	210.92	203.09	206.33	196.5907	1.89E+09
2016-05-01	206.92	210.69	202.78	209.84	199.935	1.83E+09
2016-06-01	209.12	212.52	198.65	209.48	199.592	2.61E+09
2016-07-01	209.48	217.54	207.06	217.12	207.9476	1.64E+09
2016-08-01	217.19	219.6	214.25	217.38	208.1966	1.51E+09
2016-09-01	217.37	219.22	212.31	216.3	207.1622	2.29E+09
2016-10-01	215.82	216.7	211.21	212.55	204.599	1.72E+09
2016-11-01	212.93	221.82	208.38	220.38	212.1361	2.06E+09
2016-12-01	220.73	228.34	219.15	223.53	215.1683	1.81E+09
2017-01-01	225.04	229.71	223.88	227.53	220.3095	1.48E+09
2017-02-01	227.53	237.31	226.82	236.47	228.9658	1.36E+09
2017-03-01	238.39	240.32	231.61	235.74	228.259	1.92E+09
2017-04-01	235.8	239.53	232.51	238.08	231.5276	1.54E+09
2017-05-01	238.68	242.08	235.43	241.44	234.7951	1.49E+09
2017-06-01	241.97	245.01	239.96	241.8	235.1452	1.57E+09
2017-07-01	242.88	248	240.34	246.77	241.1487	1.06E+09
2017-08-01	247.46	248.91	241.83	247.49	241.8523	1.55E+09
2017-09-01	247.92	251.32	244.95	251.23	245.5071	1.29E+09
2017-10-01	251.49	257.89	251.29	257.15	252.5394	1.32E+09
2017-11-01	258.04	266.05	255.63	265.01	260.2585	1.37E+09
2017-12-01	264.76	268.6	260.76	266.86	262.0753	1.72E+09
2018-01-01	267.84	286.63	267.4	281.9	278.2607	1.98E+09
2018-02-01	281.07	283.06	252.92	271.65	268.143	2.92E+09
2018-03-01	271.41	280.41	257.83	263.15	259.7527	2.32E+09
2018-04-01	262.55	271.3	254.67	264.51	262.1409	2E+09
2018-05-01	263.87	274.25	259.05	270.94	268.5133	1.6E+09
2018-06-01	272.41	279.48	268.49	271.28	268.8503	1.6E+09
2018-07-01	269.51	284.37	269.24	281.33	280.0622	1.27E+09
2018-08-01	281.56	291.74	279.16	290.31	289.0017	1.31E+09
2018-09-01	289.84	293.94	286.71	290.72	289.4099	1.23E+09
2018-10-01	292.11	293.21	286.22	287.82	287.82	3.91E+08

1. What are the annualized expected return and volatility for COST and SPY based on the data you downloaded (you can use Excel functions to find these)?

Date	Rf
2013-10-01	0
2013-11-01	0
2013-12-01	0
2014-01-01	0
2014-02-01	0
2014-03-01	0
2014-04-01	0
2014-05-01	0
2014-06-01	0
2014-07-01	0
2014-08-01	0
2014-09-01	0
2014-10-01	0
2014-11-01	0
2014-12-01	0
2015-01-01	0
2015-02-01	0
2015-03-01	0
2015-04-01	0
2015-05-01	0
2015-06-01	0
2015-07-01	0
2015-08-01	0
2015-09-01	0
2015-10-01	0
2015-11-01	0
2015-12-01	0.01
2016-01-01	0.01
2016-02-01	0.02
2016-03-01	0.02
2016-04-01	0.01
2016-05-01	0.01
2016-06-01	0.02
2016-07-01	0.02
2016-08-01	0.02
2016-09-01	0.02
2016-10-01	0.02
2016-11-01	0.01
2016-12-01	0.03
2017-01-01	0.04
2017-02-01	0.04
2017-03-01	0.03
2017-04-01	0.05
2017-05-01	0.06
2017-06-01	0.06
2017-07-01	0.07
2017-08-01	0.09
2017-09-01	0.09
2017-10-01	0.09
2017-11-01	0.08
2017-12-01	0.09
2018-01-01	0.11
2018-02-01	0.11
2018-03-01	0.12
2018-04-01	0.14
2018-05-01	0.14
2018-06-01	0.14
2018-07-01	0.16
2018-08-01	0.16
2018-09-01	0.16
2018-10-01	0.16

2. Using a regression framework, estimate COSTs beta. Attach a printout of the regression output to this page, and circle beta. Below, discuss what the regression tells us about COSTs returns.

3. Plot both COST and SPY on a Security Market Line. Label the axes and each point on the line.

4. Based on the information above, can you say that an investment in COST beat the market on a risk-adjusted basis during the 5-year time frame?

5.COST released their earnings after the market close on 10/4. Using the information above and daily returns for COST and SPY, find the abnormal daily return associated with COSTs earnings report. (The abnormal return is the firm-specific component of a stocks return). Since we are dealing with a daily return, you may assume a negligible risk-free rate.

6. Based on your answer to the previous question, what can you conclude about COSTs earnings report?