Reference no: EM132144187

Assignment - Evaluating sensitivity to risk

You may do this case individually or with one other person.

Select three companies from different industries. Each company must have stock prices continuously available for March 1, 2012 through June 30, 2018. Obtain monthly prices for each company for the period indicated. If you obtain prices from yahoo finance (the adjusted closing price), requesting monthly data will give you the price on the last trading day of the each month. If you use another source for stock prices, be sure you use the price on the last trading day of the month for the calculations in this assignment.

For each stock, select two different variables from the file: summer 2018 assignment 8 data.xlsx. (Do not use the same variable more than once.)

Using returns on the stock and percentage change on each selected variable in a single variable regression to determine the sensitivity of the stock price to each underlying variable selected. (You will have six regressions, two for each of the companies selected.)

Notes:

- The economic variables in the data file are sorted newest to oldest.

- For some, you will not be able to use all the stock returns. For these, use only returns for dates where there is a corresponding value for the percentage change in the underlying variable.

- For AAA bond yield, use the difference in yield, not the percentage change.

- Since Japanese yen is quoted in yen per dollar, invert the variable before calculating the percentage change.]

For each stock and each variable, interpret the regression results to describe the stock's risk relative to the economic variable. That is, indicate:

1. How a 1% change in the variable is expected to affect the value of the stock;

2. Whether the relationship is statistically significant (and explain how you make that determination);

3. Whether the natural risk associated with the underlying variable is long or short; and

4. How much stock return volatility can be eliminated if the risk associated with that variable could be entirely eliminated.

Attachment:- Data File.rar