Solution-Identify amount of risk of stock held in isolation

Identify amount of risk of stock held in isolation

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Reference no: EM133070561

a) Using the returns on the S&P 500 Composite Index as the proxy for the overall stock-market return, estimate the monthly average return, the standard deviation of monthly returns, and a beta for each stock listed above.

b) Which of the three stocks (IBM, CAT, MSFT) has the most total return variability if held in isolation (i.e., not as part of a well-diversified portfolio)? Clearly convey what measure you used to identify the amount of risk of a stock held in isolation.

c) Which of the three stocks (IBM, CAT, MSFT) has the most systematic risk? Clearly convey what measure you used to identify the amount of systematic risk.

Month Ending	Company Name	Holding Period Returns	Holding Period Return on the S&P 500 Index
20160129	International Business Machines (IBM)	-0.093228	-0.050735
20160229	International Business Machines (IBM)	0.060421	-0.004128
20160331	International Business Machines (IBM)	0.155842	0.065991
20160429	International Business Machines (IBM)	-0.036382	0.002699
20160531	International Business Machines (IBM)	0.06304	0.015329
20160630	International Business Machines (IBM)	-0.012749	0.000906
20160729	International Business Machines (IBM)	0.058242	0.03561
20160831	International Business Machines (IBM)	-0.002117	-0.001219
20160930	International Business Machines (IBM)	-0.000189	-0.001234
20161031	International Business Machines (IBM)	-0.032483	-0.019426
20161130	International Business Machines (IBM)	0.064611	0.034174
20161230	International Business Machines (IBM)	0.02324	0.018201
20170131	International Business Machines (IBM)	0.051389	0.017884
20170228	International Business Machines (IBM)	0.038391	0.037198
20170331	International Business Machines (IBM)	-0.031587	-0.000389
20170428	International Business Machines (IBM)	-0.079534	0.009091
20170531	International Business Machines (IBM)	-0.03843	0.011576
20170630	International Business Machines (IBM)	0.007862	0.004814
20170731	International Business Machines (IBM)	-0.059546	0.019349
20170831	International Business Machines (IBM)	-0.000968	0.000546
20170929	International Business Machines (IBM)	0.014333	0.019303
20171031	International Business Machines (IBM)	0.061897	0.022188
20171130	International Business Machines (IBM)	0.009152	0.028083
20171229	International Business Machines (IBM)	-0.003572	0.009832
20180131	International Business Machines (IBM)	0.067006	0.056179
20180228	International Business Machines (IBM)	-0.038913	-0.038947
20180329	International Business Machines (IBM)	-0.015401	-0.026885
20180430	International Business Machines (IBM)	-0.055204	0.002719
20180531	International Business Machines (IBM)	-0.014349	0.021608
20180629	International Business Machines (IBM)	-0.011393	0.004842
20180731	International Business Machines (IBM)	0.037437	0.036022
20180831	International Business Machines (IBM)	0.021528	0.030263
20180928	International Business Machines (IBM)	0.032291	0.004294
20181031	International Business Machines (IBM)	-0.236625	-0.069403
20181130	International Business Machines (IBM)	0.090184	0.017859
20181231	International Business Machines (IBM)	-0.085298	-0.091777
20190131	International Business Machines (IBM)	0.182546	0.078684
20190228	International Business Machines (IBM)	0.03928	0.029729
20190329	International Business Machines (IBM)	0.021501	0.017924
20190430	International Business Machines (IBM)	-0.005882	0.039313
20190531	International Business Machines (IBM)	-0.083125	-0.065778
20190628	International Business Machines (IBM)	0.085912	0.06893
20190731	International Business Machines (IBM)	0.074982	0.013128
20190830	International Business Machines (IBM)	-0.074811	-0.018092
20190930	International Business Machines (IBM)	0.072973	0.017181
20191031	International Business Machines (IBM)	-0.080388	0.020432
20191129	International Business Machines (IBM)	0.017498	0.034047
20191231	International Business Machines (IBM)	-0.003049	0.02859
20200131	International Business Machines (IBM)	0.072292	-0.001628
20200228	International Business Machines (IBM)	-0.083212	-0.08411
20200331	International Business Machines (IBM)	-0.147676	-0.125119
20200430	International Business Machines (IBM)	0.131885	0.126844
20200529	International Business Machines (IBM)	0.007725	0.045282
20200630	International Business Machines (IBM)	-0.033066	0.018388
20200731	International Business Machines (IBM)	0.017968	0.055101
20200831	International Business Machines (IBM)	0.016268	0.070065
20200930	International Business Machines (IBM)	-0.0133	-0.039228
20201030	International Business Machines (IBM)	-0.082272	-0.027666
20201130	International Business Machines (IBM)	0.120813	0.107546
20201231	International Business Machines (IBM)	0.019106	0.037121

20160129	Microsoft Corp. (MSFT)	-0.00703	-0.050735
20160229	Microsoft Corp. (MSFT)	-0.069886	-0.004128
20160331	Microsoft Corp. (MSFT)	0.085495	0.065991
20160429	Microsoft Corp. (MSFT)	-0.097049	0.002699
20160531	Microsoft Corp. (MSFT)	0.069982	0.015329
20160630	Microsoft Corp. (MSFT)	-0.034528	0.000906
20160729	Microsoft Corp. (MSFT)	0.10768	0.03561
20160831	Microsoft Corp. (MSFT)	0.020113	-0.001219
20160930	Microsoft Corp. (MSFT)	0.002436	-0.001234
20161031	Microsoft Corp. (MSFT)	0.040278	-0.019426
20161130	Microsoft Corp. (MSFT)	0.012183	0.034174
20161230	Microsoft Corp. (MSFT)	0.031198	0.018201
20170131	Microsoft Corp. (MSFT)	0.040393	0.017884
20170228	Microsoft Corp. (MSFT)	-0.004331	0.037198
20170331	Microsoft Corp. (MSFT)	0.029384	-0.000389
20170428	Microsoft Corp. (MSFT)	0.039478	0.009091
20170531	Microsoft Corp. (MSFT)	0.025854	0.011576
20170630	Microsoft Corp. (MSFT)	-0.01303	0.004814
20170731	Microsoft Corp. (MSFT)	0.054693	0.019349
20170831	Microsoft Corp. (MSFT)	0.033838	0.000546
20170929	Microsoft Corp. (MSFT)	-0.003745	0.019303
20171031	Microsoft Corp. (MSFT)	0.11666	0.022188
20171130	Microsoft Corp. (MSFT)	0.016951	0.028083
20171229	Microsoft Corp. (MSFT)	0.016277	0.009832
20180131	Microsoft Corp. (MSFT)	0.110708	0.056179
20180228	Microsoft Corp. (MSFT)	-0.008631	-0.038947
20180329	Microsoft Corp. (MSFT)	-0.026661	-0.026885
20180430	Microsoft Corp. (MSFT)	0.024652	0.002719
20180531	Microsoft Corp. (MSFT)	0.061377	0.021608
20180629	Microsoft Corp. (MSFT)	-0.002327	0.004842
20180731	Microsoft Corp. (MSFT)	0.075753	0.036022
20180831	Microsoft Corp. (MSFT)	0.062877	0.030263
20180928	Microsoft Corp. (MSFT)	0.018161	0.004294
20181031	Microsoft Corp. (MSFT)	-0.066101	-0.069403
20181130	Microsoft Corp. (MSFT)	0.042505	0.017859
20181231	Microsoft Corp. (MSFT)	-0.084047	-0.091777
20190131	Microsoft Corp. (MSFT)	0.028158	0.078684
20190228	Microsoft Corp. (MSFT)	0.077181	0.029729
20190329	Microsoft Corp. (MSFT)	0.052754	0.017924
20190430	Microsoft Corp. (MSFT)	0.107343	0.039313
20190531	Microsoft Corp. (MSFT)	-0.049464	-0.065778
20190628	Microsoft Corp. (MSFT)	0.083118	0.06893
20190731	Microsoft Corp. (MSFT)	0.017244	0.013128
20190830	Microsoft Corp. (MSFT)	0.015044	-0.018092
20190930	Microsoft Corp. (MSFT)	0.008487	0.017181
20191031	Microsoft Corp. (MSFT)	0.031216	0.020432
20191129	Microsoft Corp. (MSFT)	0.059427	0.034047
20191231	Microsoft Corp. (MSFT)	0.041749	0.02859
20200131	Microsoft Corp. (MSFT)	0.079455	-0.001628
20200228	Microsoft Corp. (MSFT)	-0.045292	-0.08411
20200331	Microsoft Corp. (MSFT)	-0.026541	-0.125119
20200430	Microsoft Corp. (MSFT)	0.136326	0.126844
20200529	Microsoft Corp. (MSFT)	0.025389	0.045282
20200630	Microsoft Corp. (MSFT)	0.110559	0.018388
20200731	Microsoft Corp. (MSFT)	0.007371	0.055101
20200831	Microsoft Corp. (MSFT)	0.10258	0.070065
20200930	Microsoft Corp. (MSFT)	-0.067397	-0.039228
20201030	Microsoft Corp. (MSFT)	-0.03737	-0.027666
20201130	Microsoft Corp. (MSFT)	0.060058	0.107546
20201231	Microsoft Corp. (MSFT)	0.039006	0.037121

20160129	Caterpillar Inc. (CAT)	-0.072837	-0.050735
20160229	Caterpillar Inc. (CAT)	0.087725	-0.004128
20160331	Caterpillar Inc. (CAT)	0.130576	0.065991
20160429	Caterpillar Inc. (CAT)	0.025477	0.002699
20160531	Caterpillar Inc. (CAT)	-0.067035	0.015329
20160630	Caterpillar Inc. (CAT)	0.045511	0.000906
20160729	Caterpillar Inc. (CAT)	0.101834	0.03561
20160831	Caterpillar Inc. (CAT)	-0.009787	-0.001219
20160930	Caterpillar Inc. (CAT)	0.083221	-0.001234
20161031	Caterpillar Inc. (CAT)	-0.051143	-0.019426
20161130	Caterpillar Inc. (CAT)	0.14498	0.034174
20161230	Caterpillar Inc. (CAT)	-0.02951	0.018201
20170131	Caterpillar Inc. (CAT)	0.039789	0.017884
20170228	Caterpillar Inc. (CAT)	0.010454	0.037198
20170331	Caterpillar Inc. (CAT)	-0.040348	-0.000389
20170428	Caterpillar Inc. (CAT)	0.110716	0.009091
20170531	Caterpillar Inc. (CAT)	0.030999	0.011576
20170630	Caterpillar Inc. (CAT)	0.019254	0.004814
20170731	Caterpillar Inc. (CAT)	0.067653	0.019349
20170831	Caterpillar Inc. (CAT)	0.031066	0.000546
20170929	Caterpillar Inc. (CAT)	0.061452	0.019303
20171031	Caterpillar Inc. (CAT)	0.095181	0.022188
20171130	Caterpillar Inc. (CAT)	0.039396	0.028083
20171229	Caterpillar Inc. (CAT)	0.116401	0.009832
20180131	Caterpillar Inc. (CAT)	0.037949	0.056179
20180228	Caterpillar Inc. (CAT)	-0.050068	-0.038947
20180329	Caterpillar Inc. (CAT)	-0.046886	-0.026885
20180430	Caterpillar Inc. (CAT)	-0.015199	0.002719
20180531	Caterpillar Inc. (CAT)	0.0523	0.021608
20180629	Caterpillar Inc. (CAT)	-0.106905	0.004842
20180731	Caterpillar Inc. (CAT)	0.066264	0.036022
20180831	Caterpillar Inc. (CAT)	-0.034423	0.030263
20180928	Caterpillar Inc. (CAT)	0.098235	0.004294
20181031	Caterpillar Inc. (CAT)	-0.198767	-0.069403
20181130	Caterpillar Inc. (CAT)	0.118282	0.017859
20181231	Caterpillar Inc. (CAT)	-0.063389	-0.091777
20190131	Caterpillar Inc. (CAT)	0.054694	0.078684
20190228	Caterpillar Inc. (CAT)	0.031391	0.029729
20190329	Caterpillar Inc. (CAT)	-0.01347	0.017924
20190430	Caterpillar Inc. (CAT)	0.035353	0.039313
20190531	Caterpillar Inc. (CAT)	-0.140654	-0.065778
20190628	Caterpillar Inc. (CAT)	0.137551	0.06893
20190731	Caterpillar Inc. (CAT)	-0.026341	0.013128
20190830	Caterpillar Inc. (CAT)	-0.096225	-0.018092
20190930	Caterpillar Inc. (CAT)	0.061429	0.017181
20191031	Caterpillar Inc. (CAT)	0.099121	0.020432
20191129	Caterpillar Inc. (CAT)	0.05029	0.034047
20191231	Caterpillar Inc. (CAT)	0.020383	0.02859
20200131	Caterpillar Inc. (CAT)	-0.103602	-0.001628
20200228	Caterpillar Inc. (CAT)	-0.05413	-0.08411
20200331	Caterpillar Inc. (CAT)	-0.066001	-0.125119
20200430	Caterpillar Inc. (CAT)	0.011806	0.126844
20200529	Caterpillar Inc. (CAT)	0.032222	0.045282
20200630	Caterpillar Inc. (CAT)	0.053026	0.018388
20200731	Caterpillar Inc. (CAT)	0.058577	0.055101
20200831	Caterpillar Inc. (CAT)	0.070966	0.070065
20200930	Caterpillar Inc. (CAT)	0.048064	-0.039228
20201030	Caterpillar Inc. (CAT)	0.059873	-0.027666
20201130	Caterpillar Inc. (CAT)	0.105317	0.107546
20201231	Caterpillar Inc. (CAT)	0.048563	0.037121

Reference no: EM133070561

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