Excess Return of RAMSAY HEALTH CARE, business and finance homework help

timer Asked: Oct 15th, 2016
account_balance_wallet $9.99

Question Description

Pick three stocks of your choice (Select stocks listed in the USA exchange traded market), preferably from different industry groups. Go to the recommended websites or any other website that offers historical stock price data or to published information sources such as Yahoo Finance, or Google finance or any other reliable source of financial information. Extract weekly (for example, every Friday) closing share prices for the most recent 28 weeks. Also extract the values of the stock market index, (represented by S&P500 index or All Ordinaries in US), on a weekly basis over the same time period.


Part 1 (30 marks)

(a) The rate of return in each week for each stock and for the stock market index for the 27 weekly periods. Calculate the discrete rate of return as well as the continuously compounded rate of return. Calculate the arithmetic mean return and the geometric mean return of each stock for the entire period. Use only the discrete returns for your calculations and for the calculations in the questions that follow. (10 marks)

(b) The variance of returns for each stock and the index and the covariances of returns between each pair of stocks, the covariance between each stock and the stock market index, and the corresponding correlation coefficients. (5 marks)

(c) Compare your results in (a) and (b) for each stock and the stock market index and comment on the risk return characteristics and performance of each of your stocks and the index. Illustrate with tables/charts as appropriate. Comment on the results, relating to what you have learnt in this course. Relate the risk return pattern and the performance of the market index and your stocks to relevant events that took place during this period. Draw on economic, political, industry and company related events that took place over this period that may have impacted on the performance of your stocks and the market index. Give bibliographic references to the sources of your information. (15 marks)

Part 2 (10 marks)

(a) Based on the discrete returns calculations in Part 1, compute the weekly rate of return and the variance of an equally weighted portfolio formed from the three stocks. Make use of your knowledge of matrix algebra in your calculations. (5 marks)

(b). Examine and compare the pattern of the returns of your portfolio with those of the individual stocks, and the stock index. Compare the corresponding variances. Comment on your observations, relating to material learnt in this course. (5 marks)

Part 3 (45 marks)

(a) Extract for each week, the yield of the 26-week Treasury bill (or equivalently the 90 day or 180-day bank accepted bill from the financial media (i.e. Federal Reserve Bank: http://www.federalreserve.gov/default.htm) over your sample period. (Remember sometimes reported yields are usually annualised figures. Convert the yields to weekly numbers. Use these as a proxy for the risk free rate).

(5 marks)

(b) Estimate the Security Characteristic Line (SCL) for each of your stocks and the equal weighted portfolio, based on the ‘Market Model’, using excess returns (discrete returns less the risk free rate), using Excel regression analysis functions. Show your results graphically. From your results, compute the Beta and the Jensen’s Alpha of each stock and the portfolio. (15 marks)

(c) Calculate the total risk (the return variance) of each stock and the portfolio. Partition the total risk to their respective systematic and unsystematic risk components. (10 marks)

(d) Based on your observations and results in parts (b) and (c) above, comment on each of your stock's and portfolio's performance, and on their risk characteristics, comparing and contrasting the magnitude and the proportions of their systematic and unsystematic risk components. What further insights can you gain on the characteristics and behaviour of your stocks and portfolio compared to the analysis and observations you made in Part 1 (c) and Part 2 (b)? (15 marks)

Tutor Answer

Expert Writer
School: Duke University

hello good frie...

flag Report DMCA

Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

Similar Questions
Related Tags

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors