The tab contains monthly holding period stock returns for International Business Machines Corp. (IBM), Microsoft Corp. (MSFT),

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Question:

The tab contains monthly holding period stock returns for International Business Machines Corp. (IBM), Microsoft Corp. (MSFT), and Caterpillar Inc. (CAT) for the months from January 2016 through December 2020, along with monthly returns for the S&P 500 Composite Index over the same interval.

Date	SPX	IBM	MSFT	CAT
1/1/2016	-5.07%	-9.32%	-0.70%	-8.42%
2/1/2016	-0.41%	5.00%	-7.64%	8.77%
3/1/2016	6.60%	15.58%	8.55%	13.06%
4/1/2016	0.27%	-3.64%	-9.70%	1.54%
5/1/2016	1.53%	5.34%	6.28%	-6.70%
6/1/2016	0.09%	-1.27%	-3.45%	4.55%
7/1/2016	3.56%	5.82%	10.77%	9.17%
8/1/2016	-0.12%	-1.08%	1.38%	-0.98%
9/1/2016	-0.12%	-0.02%	0.24%	8.32%
10/1/2016	-1.94%	-3.25%	4.03%	-5.98%
11/1/2016	3.42%	5.55%	0.57%	14.50%
12/1/2016	1.82%	2.32%	3.12%	-2.95%
1/1/2017	1.79%	5.14%	4.04%	3.15%
2/1/2017	3.72%	3.04%	-1.04%	1.05%
3/1/2017	-0.04%	-3.16%	2.94%	-4.03%
4/1/2017	0.91%	-7.95%	3.95%	10.24%
5/1/2017	1.16%	-4.78%	2.02%	3.10%
6/1/2017	0.48%	0.79%	-1.30%	1.93%
7/1/2017	1.93%	-5.95%	5.47%	6.04%
8/1/2017	0.05%	-1.13%	2.85%	3.11%
9/1/2017	1.93%	1.43%	-0.37%	6.15%
10/1/2017	2.22%	6.19%	11.67%	8.89%
11/1/2017	2.81%	-0.06%	1.19%	3.94%
12/1/2017	0.98%	-0.36%	1.63%	11.64%
1/1/2018	5.62%	6.70%	11.07%	3.30%
2/1/2018	-3.89%	-4.81%	-1.31%	-5.01%
3/1/2018	-2.69%	-1.54%	-2.67%	-4.69%
4/1/2018	0.27%	-5.52%	2.47%	-2.05%
5/1/2018	2.16%	-2.52%	5.69%	5.23%
6/1/2018	0.48%	-1.14%	-0.23%	-10.69%
7/1/2018	3.60%	3.74%	7.58%	5.99%
8/1/2018	3.03%	1.07%	5.89%	-3.44%
9/1/2018	0.43%	3.23%	1.82%	9.82%
10/1/2018	-6.94%	-23.66%	-6.61%	-20.44%
11/1/2018	1.79%	7.66%	3.82%	11.83%
12/1/2018	-9.18%	-8.53%	-8.40%	-6.34%
1/1/2019	7.87%	18.25%	2.82%	4.79%
2/1/2019	2.97%	2.76%	7.28%	3.14%
3/1/2019	1.79%	2.15%	5.28%	-1.35%
4/1/2019	3.93%	-0.59%	10.73%	2.90%
5/1/2019	-6.58%	-9.47%	-5.30%	-14.07%
6/1/2019	6.89%	8.59%	8.31%	13.76%
7/1/2019	1.31%	7.50%	1.72%	-3.39%
8/1/2019	-1.81%	-8.57%	1.17%	-9.62%
9/1/2019	1.72%	7.30%	0.85%	6.14%
10/1/2019	2.04%	-8.04%	3.12%	9.10%
11/1/2019	3.40%	0.54%	5.59%	5.03%
12/1/2019	2.86%	-0.30%	4.17%	2.04%
1/1/2020	-0.16%	7.23%	7.95%	-11.06%
2/1/2020	-8.41%	-9.45%	-4.83%	-5.41%
3/1/2020	-12.51%	-14.77%	-2.65%	-6.60%
4/1/2020	12.68%	13.19%	13.63%	0.29%
5/1/2020	4.53%	-0.53%	2.25%	3.22%
6/1/2020	1.84%	-3.31%	11.06%	5.30%
7/1/2020	5.51%	1.80%	0.74%	5.04%
8/1/2020	7.01%	0.30%	10.01%	7.10%
9/1/2020	-3.92%	-1.33%	-6.74%	4.81%
10/1/2020	-2.77%	-8.23%	-3.74%	5.30%
11/1/2020	10.75%	10.62%	5.73%	10.53%
12/1/2020	3.71%	1.91%	3.90%	4.86%

1) 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?

2) 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)?

3) Clearly convey what measure you used to identify the amount of risk of a stock held in isolation.

4) 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?