FIN$4210$ Assignment $2$

Q$1(30$ points$).$ In the module $3($capm$.$R$),$ we have studied the CAPM model by solving linear

regression between Ford stock return and S&P$500$ market index. Now, please

$($A$)$ Redo the CAPM linear regressions for other stocks $($GE$,$ Microsoft and Oracle$),$ and what's your

conclusion on the alpha and beta for each company. Please also discuss the statistic significance

for the two parameters, and R$-$square of the model.

$($B$)$ If we construct an equal$-$weighted portfolio of all of the four stocks $($e$.$g$.$ the portfolio return will.

be the ayerage of the four returns for each date$).$ Repeat the CAPM regression and compare

results

$($C$)$ Let's augment the CAPM regression by adding another factor: Treasury Bill $(3$ months$),$ and

redo $($A$)$ and $($B$).$ What's your conclusion? $($Note that in this case, it will not be CAPM anymore,

it becomes a multi$-$factor asset pricing model$)$