Rob McGowan collects data from General Motors, General Electric, Oracle, and Mic
ID: 2614233 • Letter: R
Question
Rob McGowan collects data from General Motors, General Electric, Oracle, and Microsoft. His professor seeks to form a portfolio using these stocks. ?
1. Estimate and compare the monthly returns and variability (standard deviation) of each stock with that of the DJIA Index.
a) Which stock appears to be riskiest? Less risky?
b) How might the expected return of each stock relate to its riskiness?
Monthly Risk-Free rate (in percentages)
1997-06-01
4.93
1997-07-01
5.05
1997-08-01
5.14
1997-09-01
4.95
1997-10-01
4.97
1997-11-01
5.14
1997-12-01
5.16
1998-01-01
5.04
1998-02-01
5.09
1998-03-01
5.03
1998-04-01
4.95
1998-05-01
5.00
1998-06-01
4.98
1998-07-01
4.96
1998-08-01
4.90
1998-09-01
4.61
1998-10-01
3.96
1998-11-01
4.41
1998-12-01
4.39
1999-01-01
4.34
1999-02-01
4.44
1999-03-01
4.44
1999-04-01
4.29
1999-05-01
4.50
1999-06-01
4.57
1999-07-01
4.55
1999-08-01
4.72
1999-09-01
4.68
1999-10-01
4.86
1999-11-01
5.07
1999-12-01
5.20
2000-01-01
5.32
2000-02-01
5.55
2000-03-01
5.69
2000-04-01
5.66
2000-05-01
5.79
2000-06-01
5.69
1997-06-01
4.93
1997-07-01
5.05
1997-08-01
5.14
1997-09-01
4.95
1997-10-01
4.97
1997-11-01
5.14
1997-12-01
5.16
1998-01-01
5.04
1998-02-01
5.09
1998-03-01
5.03
1998-04-01
4.95
1998-05-01
5.00
1998-06-01
4.98
1998-07-01
4.96
1998-08-01
4.90
1998-09-01
4.61
1998-10-01
3.96
1998-11-01
4.41
1998-12-01
4.39
1999-01-01
4.34
1999-02-01
4.44
1999-03-01
4.44
1999-04-01
4.29
1999-05-01
4.50
1999-06-01
4.57
1999-07-01
4.55
1999-08-01
4.72
1999-09-01
4.68
1999-10-01
4.86
1999-11-01
5.07
1999-12-01
5.20
2000-01-01
5.32
2000-02-01
5.55
2000-03-01
5.69
2000-04-01
5.66
2000-05-01
5.79
2000-06-01
5.69
Exhibit 1 MONTHLY RETURN DATA Month Sale date GM GE Oracle Microsoft DJIA 1 2 1-Jun-97 -0.86995 10.49754 21.13459 2.77686 4.485357 1-Jul-97 1710171 9.648689-0.91827 0.450306 5.939172 3 1-Aug-97 14.31172 5.415162 13.06766 12.58405 6.10839 -2.62739-9.50521 4.180328 6.00114-6.97605 51-Oct-9710.83401 9.592326-5.58615 1.270802 5.156892 1.20823-0.70022 -0.33333 0.179265 25563 7 1-Dec-97-8.00688 10.23692 -11.1204 7.217417 4.413641 1.30861 91-Feb-98-0.41824 8.503679 10.34946 19.83906 2.523061 17.14 -2.52101 -2.07065 7.592975 5.459818 11 1-Apr-98 2.11712 12.89185 30.09958.473356 3.717582 12 1-May-98 1.760057 -0.41652 -18.5468 -0.840893.143211 -2.45652 1-Jul-98 -0.88465 10.02896 5.526316 30.61858 1.415543 15 1-Aug-98 3.833245 -0.65811 10.72319 -0.85939-2.89468 10.9177 2.78546 2.48996 18 1-Nov-98 20.29924 17.07705 10.88889 1.691332 14.06637 19 1-Dec-98 10.07982 4.292582 23.34669 22.37762 4.909059 20 1-Jan-99 2.512648 11.95258 16.8156 7.088803 0.524331 21 1-Feb-99 30.486981.411765 37.0653724.70436 1.789155 12.2586-0.22385 23 1-Apr-99 5.181951 10.58264 -29.492122.1695 5.444954 13.8203 12.02318 1.72759-3.79884 1.99462 8.718549 48.07843 16.16561 4.437037 27 1-Aug-99 -8.50214 -2.12594 0.95339 -6.99638-3.79942 28 1-Sep-997.967033 5.396384 -1.15425 8.925834 2.742073 2.59796 -6.07869 30 1-Nov-9910.44177 11.29857 13.07998 2.667259 3.655407 31 1-Dec-99 5.367273 4.012059 38.10082 0.876813 3.285621 25.0778 3.265296 11.685 -2.78644 11.7836-8.17975 35 1-Apr-00 16.44444 20.82667 7.524476 0.07708410.69253 36 1-???-00 9.291357 1.323001 3.655047-19.1901-3.65481 12.0915 -1.47598 4 1-Sep-97 6 1-Nov-97 8 1-Jan-98 6.896552-0.81103 -30.0094 10.1252 10 1-Mar-98 13 1-Jun-98 3.741617-2.50618-10.7981 -6.56104 17.0466 -7.60979 -22.8604-6.63962 16 1-Sep-98 17 1-Oct-984.77851-8.6357 31.38686 22 1-Mar-99 10.9758-1.23312 -7.10299 9.7295-4.24731 0.929512 24 1-May-99 25 1-Jun-99-8.76355 -2.89773 -2.14889 26 1-Jul-99 291-Oct-994.35564 3.246239 20.11677 32 1-Jan-00 5.300939 11.46042 67.11941 33 1-Feb-00 34 1-Mar-00 14.2302-8.34167 -8.56756 12.9032 -3.39731 32.40741 37 1-Jun-00 24.6844-1.39307 -2.2713Explanation / Answer
Answer 1)
observations
Answer 2)
Beta = Covariance ( Rstock , RIndex) / Variance (RIndex)
Month Sale Date GM GE Oracle Microsoft DJIA 1 1-Jun-97 -0.86995 10.49754 21.13459 2.77686 4.485357 2 1-Jul-97 1.710171 9.648689 -0.91827 0.450306 5.939172 3 1-Aug-97 14.31172 5.415162 13.06766 12.58405 6.10839 4 1-Sep-97 -2.62739 -9.50521 4.180328 -6.00114 -6.97605 5 1-Oct-97 10.83401 9.592326 -5.58615 1.270802 5.156892 6 1-Nov-97 -1.20823 -0.70022 -0.33333 0.179265 -4.25563 7 1-Dec-97 -8.00688 10.23692 -11.1204 7.217417 4.413641 8 1-Jan-98 6.896552 -0.81103 -30.0094 -10.1252 -1.30861 9 1-Feb-98 -0.41824 8.503679 10.34946 19.83906 2.523061 10 1-Mar-98 17.14 -2.52101 -2.07065 7.592975 5.459818 11 1-Apr-98 2.11712 12.89185 30.0995 8.473356 3.717582 12 1-May-98 1.760057 -0.41652 -18.5468 -0.84089 3.143211 13 1-Jun-98 3.741617 -2.50618 -10.7981 -6.56104 -2.45652 14 1-Jul-98 -0.88465 10.02896 5.526316 30.61858 1.415543 15 1-Aug-98 3.833245 -0.65811 10.72319 -0.85939 -2.89468 16 1-Sep-98 -17.0466 -7.60979 -22.8604 -6.63962 -10.9177 17 1-Oct-98 -4.77851 -8.6357 31.38686 2.78546 -2.48996 18 1-Nov-98 20.29924 17.07705 10.88889 1.691332 14.06637 19 1-Dec-98 10.07982 4.292582 23.34669 22.37762 4.909059 20 1-Jan-99 2.512648 11.95258 16.8156 7.088803 0.524331 21 1-Feb-99 30.48698 1.411765 37.06537 24.70436 1.789155 22 1-Mar-99 -10.9758 -1.23312 -7.10299 -12.2586 -0.22385 23 1-Apr-99 5.181951 10.58264 -29.4921 22.1695 5.444954 24 1-May-99 9.7295 -4.24731 0.929512 -13.8203 12.02318 25 1-Jun-99 -8.76355 -2.89773 -2.14889 -1.72759 -3.79884 26 1-Jul-99 -1.99462 8.718549 48.07843 16.16561 4.437037 27 1-Aug-99 -8.50214 -2.12594 0.95339 -6.99638 -3.79942 28 1-Sep-99 7.967033 5.396384 -1.15425 8.925834 2.742073 29 1-Oct-99 -4.35564 3.246239 20.11677 -2.59796 -6.07869 30 1-Nov-99 10.44177 11.29857 13.07998 2.667259 3.655407 31 1-Dec-99 5.367273 4.012059 38.10082 0.876813 3.285621 32 1-Jan-00 5.300939 11.46042 67.11941 25.0778 3.265296 33 1-Feb-00 14.2302 -8.34167 -8.56756 -11.685 -2.78644 34 1-Mar-00 -12.9032 -3.39731 32.40741 -11.7836 -8.17975 35 1-Apr-00 16.44444 20.82667 7.524476 0.077084 10.69253 36 1-May-00 9.291357 1.323001 3.655047 -19.1901 -3.65481 37 1-Jun-00 -24.6844 -1.39307 -2.2713 -12.0915 -1.47598 Average Monthly Return 2.74750927 3.551722027 7.934300243 2.768428 1.294614865 Standard Deviation 10.85122444 7.54193942 20.93921525 12.30977448 5.474731391 Variation 117.7490719 56.88085022 438.4507353 151.5305478 29.9726838Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.