Reference no: EM131268630

Finance: Investments

Project Assignment:

Part Two: Estimation of Beta

Go to https://finance.yahoo.com, download monthly Adj. close prices download following requirements for two stocks, Dynex Capital Inc. (ticker DX); International Paper Company (ticker IP). The risk free rate is provided in separate EXCEL file.

1. Download monthly Adj. close prices (adjusted for dividend and stock split) from 1/1/2012 through 12/31/2015 for each stock. (Lists of dates, Adj. close prices, and monthly holding period returns of all the index and securities. Mean and standard deviation of all the index and securities returns. Beta of DX and IP, and show your regression output.)

2. Compute monthly holding period return using Adj. close prices.

3. Suppose we consider the USA S&P 500 index (^GSPC) as the market portfolio. Estimate betas of DX and IP based on the index model regressions, and show your regression output.

4. Calculate mean return, STD, and beta of the two portfolios: Portfolio A (90% in ^GSPC and 10% in DX), Portfolio B (90% in ^GSPC and 10% in IP). Must show your calculation by including the formulas you used.

Detailed Explanation and Presentation Requirement

* You can do much of the research over the internet (e.g., https://finance.yahoo.com), and calculation must be done in EXCEL.

*The project can be completed by a group of five (or fewer) students. Group project is HIGHLY encouraged. It is your responsibility to make sure the accuracy of the work done by your colleagues. ALL MEMBERS OF YOUR GROUP WILL RECEIVE THE SAME GRADE ON THE PROJECT. Please submit ONE copy for each group with ALL group members' names listed.

No credit will be given to a student unless both his/her first and last names are included in the project.

* The hard copy and e-copy must include the following information:

5. Lists of dates, Adj. close prices, and monthly holding period returns of all the index and securities.

6. Mean and standard deviation of all the index and securities returns.

7. Beta of DX and IP, and show your regression output.

8. Mean return, STD, and beta of the two portfolios: Portfolio A (90% in ^GSPC and 10% in DX), Portfolio B (90% in ^GSPC and 10% in IP). Must show your calculation by including the formulas you used.

9. Written discussions addressing the questions that are raised above in both parts. Any data, analysis, and evidence you used to support your argument must be presented in the hard copy.

Attachment:- Attachments.rar