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(Solved) Download 61 months (December 2011 to December 2016) of monthly data for the SPDR S&P 500 Index ETF (symbol = SPY). Download 61 months (December...


Download 61 months (December 2011 to December 2016) of monthly data for the SPDR S&P 500 Index ETF (symbol = SPY). Download 61 months (December 2011 to December 2016) of Alphabet Inc. data (symbol = GOOGL) and 61 months (December 2011 to December 2016) of Exxon Mobil Corporation data (symbol = XOM). Download 61 months (December 2011 to December 2016) of iShares 1–3 Year Treasury Bond ETF data (symbol = SHY). Be sure to use end-of-month data! Construct the following on a spreadsheet:

1. Calculate 60 months of returns for the SPDR S&P 500 Index ETF, Alphabet, Exxon, and the iShares 1–3 Year Treasury Bond ETF. (Please compute simple monthly returns not continuously compounded returns.)  Use January 2012 to December 2016. Note this means you need price data for December 2011.  On the answer sheet report the average monthly returns for the SPDR S&P 500 Index ETF, Alphabet, Exxon, and the iShares 1–3 Year Treasury Bond ETF.

2. Calculate excess returns for the SPDR S&P 500 Index ETF, Alphabet and Exxon. Use the monthly returns on the iShares 1–3 Year Treasury Bond ETF as your monthly risk–free return.  On the answer sheet report the average monthly excess returns for the SPDR S&P 500 Index ETF, Alphabet and Exxon.

3. Regress excess Alphabet returns on the excess SPDR S&P 500 Index ETF returns and report, on the answer sheet, α, β, the r-square and whether α and β are different from zero at the 10% level of significance. Briefly explain your inference.

4. Use equation 8.10 to decompose total risk for Alphabet into systematic risk and firm-specific risk. That is, calculate total risk, systematic risk and firm-specific risk for Alphabet.

5. Regress excess Exxon returns on the excess SPDR S&P 500 Index ETF returns and report, on the answer sheet, α, β, the r-square and whether α and β are different from zero at the 10% level of significance. Briefly explain your inference.

6. Use equation 8.10 to decompose total risk for Exxon into systematic risk and firm-specific risk. That is, calculate total risk, systematic risk and firm-specific risk for Exxon.

7. Use equation 8.10 to estimate the covariance and correlation of Alphabet and Exxon excess returns.

 


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