Instructions:

Using the spreadsheet, complete the following tasks:

a. Convert the closing price series into holding period rates of return. Then compute the average monthly rate of return for Patch Ltd. and the S&P500.

b. Compute the variance and standard deviation in the monthy rates of return for Patch Ltd. and the S&P500. Compute the correlation in the monthly returns of Patch Ltd. and the S&P500.

c. Using the monthly rate of return for Patch Ltd. as the dependent variable and the return on the S&P500 as the independent variable, estimate the slope and intercept coefficients for Patch Ltd.

d. Split the period into two "equal" sub-periods. Re-estimate the intercept and slope coefficients for each of the two sub-periods.

Discuss the results that you have obtained. In particular, how do the statistics computed in the "half-periods" differ and how do they differ from those obtained from the whole period? Based on your results, what kinds of difficulties do these results portend for empirical based portfolio management tools?

Attachment:- Data.rar