Reference no: EM133305680

This question is based on the historical return data on stocks of U.S. companies used in Assignment 1. You can only use the stocks used in Assignment 1 - listed in the S-P 500 over the period June 2016 - June 2020 at the monthly frequency - one stock from each of the following industries: 1) Financials, 2) Technology, 3) Consumer Staples, 4) Health Care, 5) Communication Services, and 6) Industrials. In addition, only the downloaded risk- free rate for the U.S. as well as the return on the S-P 500 over the same period for Assignment 1 can be used. When submitting your work in Excel on Assignment 2, add in separate tab sheets your Assignment 1 submission (or any updated results since then) to the Excel file.

Note: If needed, you can use your preferred financial data provider to collect additional stock / returns data, e.g., Yahoo Finance, Bloomberg, etc. Using FactSet via the investment lab (location MB 12.254) or via the available remote access is strongly recommended for this exercise. Risk-free rate for the U.S. - use the T-bill Rate (3-month).

a) Use sample data from June 2016 until June 2018 only: estimate the individual stocks' betas and interpret the results? In how many of the regressions is the beta coefficient estimate statistically significant? [Hint: you can use whatever software you like for the regression analysis; in Excel you can use the function LINEST].

b) What is the beta of the equally weighted portfolio over this time period? Interpret the results.

c) Comment on the differences in beta estimates for the individual stocks and the equally weighted portfolio.