Solution-Monthly returns and excel functions slope and rsq

Monthly returns and excel functions slope and rsq

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Reference no: EM131226986

Identify a sample of food companies. For example, you could try Campbell Soup (CPB), General Mills (GIS), Kellogg (K), Kraft Foods (KFT), and Sara Lee (SLE).

a. Estimate beta and R2 for each company, using five years of monthly returns and Excel functions SLOPE and RSQ.

b. Average the returns for each month to give the return on an equally weighted portfolio of the stocks. Then calculate the industry beta using these portfolio returns. How does the R2 of this portfolio compare with the average R2 of the individual stocks?

c. Use the CAPM to calculate an average cost of equity (r equity) for the food industry. Use current interestrates-takea look at the end of Section 9-2-and a reasonable estimate of the market risk premium.

Reference no: EM131226986

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