Please complete the following requirements for S&P 500 index ETF (ticker SPY) and two stocks, Dynex Capital
Question:
Please complete the following requirements for S&P 500 index ETF (ticker SPY) and two stocks, Dynex Capital Inc. (ticker DX); International Paper Company (ticker IP). 2. Compute monthly holding period return using Adj. close prices.
3. Suppose we consider the S&P 500 index ETF (SPY) as the market portfolio. Estimate betas of DX and IP based on the Single Index Model regression, and report your regression output.
4. Calculate mean return, STD, and beta of the two portfolios: Portfolio A (70% in SPY/30% in DX), Portfolio B (70% in SPY/30% in IP). Must show your calculation with imputed formulas or typed formulas that are clearly labelled in the Excel.
5. Based on the regression results, which stock (DX or IP) has a larger fraction (among the total variance) of firm-specific variance (risk)? And explain why you believe so?
6. Based on the regression results, is there any arbitrage opportunity of trading the three securities, SPY, DX and IP? Is the arbitrage opportunity reliable? And explain why?
Fundamental financial accounting concepts
ISBN: 978-0078025365
8th edition
Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward