PART III. MEASURING STOCK PERFORMANCE This part of the projectenables you to analyze the risk and r Assignment Help

  

PART III. MEASURING STOCK PERFORMANCE This part of the projectenables you to analyze the risk and return characteristics of oneparticular stock that you own or would like to purchase. You shouldinput your data on Excel or an alternative electronic spreadsheet.Perform the following tasks.a. Obtain stock price data at the end of each of the last 16quarters, and fill in that information in Column A of yourelectronic spreadsheet. Historical stock price data are availableon the Yahoo! finance website and on other websites. Your professormay offer some suggestions on where to obtain this information.b. Obtain the data on dividend per share for this firm for eachof the last 16 quarters, and input that information in Column B ofyour electronic spreadsheet. When you obtain dividend data,recognize that the dividend is often listed on an annual basis. Inthis case, divide the annual dividend by 4 to obtain the quarterlydividend.c. UseAc€A?computeAc€??statements to derive the quarterly return on yourstock in Column C of your electronic spreadsheet. The return on thestock during any quarter is computed as follows. First, compute thestock price at the end of that quarter minus the stock price at theend of the previous quarter, then add the quarterly dividend, andthen divide by the stock price at the end of the previousquarter.d. Input the S&P 500 stock index level as of the end of eachof the 16 quarters in Column D of your electronic spreadsheet.e. UseAc€A?computeAc€??statements to derive the quarterly stock marketreturn in Column E, which is equal to the percentage change in theS&P 500 index level from the previous quarter.f. Using the tools in an electronic package, run a regressionanalysis in which your quarterly stock return (Column C) representsthe dependent variable and the stock market return (Column E)represents the independent variable. This analysis can be easilyrun by Excel.g. Based on your regression results, what is the relationshipbetween the market return and your stockAc€?cs return? (The slopecoefficient represents the estimate of your firmAc€?cs beta, which is ameasure of its systematic risk.)h. Based on your regression results, does it appear that thereis a significant relationship between the market return and yourstockAc€?cs return? (The t-statistic for the slope coefficient can beassessed to determine whether there is a significantrelationship.)i. Based on your regression results, what proportion of thevariation in the stockAc€?cs returns can be explained by movements(returns) in the stock market overall? (The R-SQUARED statisticmeasures the proportion of variation in the dependent variable thatis explained by the independent variable in a regression model likethe one described previously.) Does it appear that the stockAc€?csreturn is driven mainly by stock market movements or by otherfactors that are not captured in the regression model?j. What is the standard deviation of your stockAc€?cs quarterlyreturns over the 16-quarter period? (You can easily compute thestandard deviation of your column of stock return data by usingaAc€A?computeAc€??statement.) What is the standard deviation of thequarterly stock market returns (as measured by quarterly returns onthe S&P 500 index) over the 16-quarter period? Is your stockmore volatile than the stock market in general? If so, why do youthink it is more volatile than the market?k. Assume that the average risk-free rate per quarter over the16-quarter period is 1.5 percent. Determine the Sharpe index foryour stock. (The Sharpe index is equal to your stockAc€?cs averagequarterly return, minus the average risk-free rate, divided by thestandard deviation of your stockAc€?cs returns.) Determine the Treynorindex for your stock. (The Treynor index is equal to your stockAc€?csaverage quarterly return, minus the average risk-free rate, dividedby the estimated beta of your stock.)

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