Question: Appendix 1.1: Table 1.1 - Weekly discrete rate of returns Week Date Apple Inc. (AAPL) McDonald's Corporation (MCD) Southwest Airlines Co. (LUV) S&P 500 Index
| Appendix 1.1: Table 1.1 - Weekly discrete rate of returns | |||||
| Week | Date | Apple Inc. (AAPL) | McDonald's Corporation (MCD) | Southwest Airlines Co. (LUV) | S&P 500 Index (GSPC) |
| 1 | 30-Oct-17 | ||||
| 2 | 6-Nov-17 | 1.2549% | -1.8187% | -1.1872% | -0.2141% |
| 3 | 13-Nov-17 | -2.2355% | 0.6847% | 2.2714% | -0.1336% |
| 4 | 20-Nov-17 | 2.8316% | 1.4330% | 0.7893% | 0.9140% |
| 5 | 27-Nov-17 | -2.2409% | 2.2269% | 8.6687% | 1.5293% |
| 6 | 4-Dec-17 | -0.9841% | 0.7554% | 5.6980% | 0.3512% |
| 7 | 11-Dec-17 | 2.7198% | 0.5289% | 2.3625% | 0.9168% |
| 8 | 18-Dec-17 | 0.5968% | -1.5205% | 1.9672% | 0.2814% |
| 9 | 25-Dec-17 | -3.3001% | 0.4109% | -0.7899% | -0.3626% |
| 10 | 1-Jan-18 | 3.4068% | 1.1225% | -1.7302% | 2.6010% |
| 11 | 8-Jan-18 | 1.1923% | -0.2775% | 1.6204% | 1.5708% |
| 12 | 15-Jan-18 | 0.7741% | 1.4668% | -0.4753% | 0.8635% |
| 13 | 22-Jan-18 | -3.8916% | 1.2742% | -6.5013% | 2.2265% |
| 14 | 29-Jan-18 | -6.4234% | -5.0327% | -3.4767% | -3.8547% |
| 15 | 5-Feb-18 | -2.5435% | -5.0677% | -5.4626% | -5.1620% |
| 16 | 12-Feb-18 | 10.6908% | -1.8712% | 5.0018% | 4.3011% |
| 17 | 19-Feb-18 | 1.7815% | 3.3355% | -0.4815% | 0.5519% |
| 18 | 26-Feb-18 | 0.4004% | -9.0662% | -0.3110% | -2.0402% |
| 19 | 5-Mar-18 | 2.1421% | 6.7192% | 3.2588% | 3.5418% |
| 20 | 12-Mar-18 | -1.0876% | 3.2562% | 2.2327% | -1.2402% |
| 21 | 19-Mar-18 | -7.3475% | -4.5455% | -6.8637% | -5.9502% |
| 22 | 26-Mar-18 | 1.7224% | 0.9033% | 0.9873% | 2.0326% |
| 23 | 2-Apr-18 | 0.3530% | 3.1142% | -3.4742% | -1.3783% |
| 24 | 9-Apr-18 | 3.7739% | 0.2977% | -0.3979% | 1.9900% |
| 25 | 16-Apr-18 | -5.1591% | -1.8302% | -0.5448% | 0.5210% |
| 26 | 23-Apr-18 | -2.0475% | -0.2960% | -2.2640% | -0.0086% |
| 27 | 30-Apr-18 | 13.2468% | 4.2514% | -1.4011% | -0.2431% |
| 28 | 7-May-18 | 2.5939% | 0.2181% | -0.6063% | 2.4142% |
(a) Extract for each week, the yield of the 26-week Treasury bill (or equivalently the 90 day or 180-day bank accepted bill from the financial media (i.e. Federal Reserve Bank: http://www.federalreserve.gov/default.htm) over your sample period. (Remember sometimes reported yields are usually annualised figures. Convert the yields to weekly numbers. Use these as a proxy for the risk free rate).
(b) Estimate the Security Characteristic Line (SCL) for each of your stocks and the equal weighted portfolio, based on the Market Model, using excess returns (discrete returns less the risk free rate), using Excel regression analysis functions. Show your results graphically. From your results, compute the Beta and the Jensens Alpha of each stock and the portfolio.
(c) Calculate the total risk (the return variance) of each stock and the portfolio. Partition the total risk to their respective systematic and unsystematic risk components.
(d) Based on your observations and results in parts (b) and (c) above, comment on each of your stock's and portfolio's performance, and on their risk characteristics, comparing and contrasting the magnitude and the proportions of their systematic and unsystematic risk components. What further insights can you gain on the characteristics and behaviour of your stocks and portfolio compared to the analysis and observations you made in Part 1 (c) and Part 2 (b)?
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