Reference no: EM131253645
1) Make a few comments on the risk characteristics of stock A and portfolio (comparing size and percentage of systematic and unsystemaic risk) and the performance of stock A and the portfolio of stocks.
Stock A: Systematic Risk = 0.032. %Systematic = 54% and %Unsystematic = 46% Discrete return = 0.26%
Portfolio: Systematic Risk = 0.025. %Systematic = 68% and %Unsystematic = 32% Discrete return = 0.08%.
2) Also what insights can be identified between analysing a stock and a portfolios performance just using weekly returns compared to analysing the stock and portfolio when you use a risk free asset to calculate the stock/porfolios excess returns and SCL?
Stock A: Discrete return = 0.26% Variance = 0.0035,
Stock A SCL: Alpha = -.003, beta =2.5
Porfolio: Discrete return = 0.08%. Variance = .00020
Portfolio SCL: Alpha =-0.0035. Beta=2
Only need a few paragraphs. ~ 200-300 words
No calculations necessary, Just comment on the scale and % of Unsystematic risk between stock and portfolio. And any differences in outcomes from calculating weekly returns to analyse a stock or going further to calculate excess returns (using t bill risk free asset) and then performing regression analysis.
For Q2: The figures are there to help you answer the question. Im not sure what the question is really asking but i guess it wants to compare the beta and explain why a portfolio has a lower beta and variance and if/why you should use excess returns and regression instead of relying just on discrete returns if you are evulating an investment decision.
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