Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Corporate Finance Expert

Data Case:

Today is April 30, 2012, and you have just started your new job with a financial planning firm. In addition to studying for all your license exams, you have been asked to review a portion of a client’s stock portfolio to find out the risk/return profiles of 12 stocks in the portfolio. Unfortunately, your small firm could not afford the expensive databases that will provide all this information with a few simple keystrokes, but that’s why they hired you. Specially, you have been asked to find the monthly average returns and standard deviations for the 12 stocks for the past five years. The stocks (with their symbols in parentheses) are:

Archer Daniels Midland (ADM)            International Business Machines Corporation (IBM)
Boeing (BA)                                   JP Morgan Chase & Co. (JPM)
Caterpillar (CAT)                             Microsoft (MSFT)
Deere & Co. (DE)                            Procter and Gamble (PG)
Google Inc. (GOOG)                        Hershey (HSY)
Wal-Mart (WMT)

1. Collect price information for each stock from Yahoo! Finance (finance.yahoo.com).

2. Convert these prices to monthly returns as the percentage change in the monthly prices (Hint: Create a separate worksheet within the Excel file.) Note that to compute a return for each month, you need a beginning and an ending price, so you will not be able to compute the return for the first month.

3. find out the mean monthly returns and standard deviations for the monthly returns of each of the stocks. Convert the monthly statistics to annual statistics for easier interpretation (multiply the mean monthly return by 12, and multiply the monthly standard deviation by √12).

4. Add the column in your Excel worksheet with average return across stocks for each monthly. This is the monthly return to an equally weighted portfolio of these 12 stocks. find out the mean and standard deviation of monthly returns for the equally weighted portfolio. Double check that the average return on this equally weighted portfolio is equal to the average return of all of the individual stocks. Convert these monthly statistics to annual statistics (as described in Step 3) for interpretation.

5. Using annual statistics, create an Excel plot with standard deviation (volatility) on the x-axis and average return on the y-axis as follows:

a. Create three columns on your spreadsheet with the statistics you created in problem 3 and 4 for each of the individual stocks and the equally weighted portfolio. First column would have the ticket, the second would have annual standard deviation, and the third will have annual mean return.

b. Highlight the data in last two columns (standard deviation and mean), select Insert>Chart>XY Scatter Plot. Complete chart wizard to finish the plot.

6. What do you notice about average of the volatilities of the individual stocks, compared to the volatility of the equally weighted portfolio?

Corporate Finance, Finance

  • Category:- Corporate Finance
  • Reference No.:- M91704

Have any Question? 


Related Questions in Corporate Finance

Ethical dilemma sandy and phil have recently married and

Ethical Dilemma. Sandy and Phil have recently married and are both in their early 20s. In establishing their financial goals, they determine that their three long-term goals are to purchase a home, to provide their child ...

Ross and rachel swimmer have come to you to get their

Ross and Rachel Swimmer have come to you to get their financial house in order. They've recently been discussing the state of their finances and their good friend Phoebe, your client, referred them to you. "We've got som ...

Amazon researchgo to financeyahoocom and choose a company

Amazon Research Go to finance.yahoo.com and choose a company that you wish to analyze. Enter the company name in the box to the left of "Get Quotes" near the top left of the page. Once you have the company overview page ...

Write in 350 wordsdefine the efficient market hypothesis

Write in 350 Words. Define the efficient market hypothesis (EMH). What are the implications of EMH for corporate managers?

Assignmentoption 1 practice in quickbooks the case of sams

Assignment Option #1: Practice in QuickBooks: The Case of Sam's Company Continue to use your QuickBooks access. Return to the QuickBook home page. Delete the information from module 3. Remember to delete the free trial a ...

Origination fees- jack needs to borrow 1000 for the next

Origination Fees- Jack needs to borrow $1,000 for the next year. Bank South will give him the loan at 9%. SunCoast Bank will give him the loan at 7% with a $50 loan origination fee. First National will give him the loan ...

Evaluation of the agencys budgeting and cumulative reportas

Evaluation of the Agency's Budgeting and Cumulative Report As a consultant, you need to develop an in-depth analysis and evaluation of the selected agency's budgeting and then provide recommendations for improvement. The ...

1 you are in charge of preparing a comprehensive budget for

1. You are in charge of preparing a comprehensive budget for your firm. Indicate how financial ratios can help determine an acceptable comprehensive budget. 2. List four popular forms of graphs used by accountants. 3. Li ...

Provide feedbackimagine that youre working as part of a

Provide feedback Imagine that you're working as part of a team to create a five-year marketing plan. Everyone had agreed to have his or her part drafted by the time your team met today. What would be an appropriate respo ...

1 what is meant by availability in logistics customer

1. What is meant by availability in logistics customer service? Provide examples of the different ways to monitor a firms performance in availability. 2. Compare and contrast speed, consistency, and flexibility as operat ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen