7. (Statistics of two stocks, regression) Consider the returns for Ford and MSFT stocks given below: A 1 B FORD AND MSFT RETURN STATISTICS, 2005-2014 C FORD MSFT 23456789 Date return return 31-Dec-05 112.92% -0.93% 31-Dec-06 -52.92% 15.82% 5 31-Dec-07 -43.44% 20.85% 31-Dec-08 -5.91% -44.37% 31-Dec-09 -5.83% 60.40% 31-Dec-10 53.33% -6.52% 31-Dec-11 -48.14% -4.52% 10 31-Dec-12 -11.38% 5.83% 11 31-Dec-13 4.73% 44.29% 12 31-Dec-14 -32.90% 27.54% a. Calculate the mean return and the standard deviation of each stock. Also calculate the correlation coefficient between the two stocks. b. Show a regression that describes the relationship between the returns of the two stocks. c. How would you construct a portfolio from those two stocks that yields 8% mean return?
7. (Statistics of two stocks, regression) Consider the returns for Ford and MSFT stocks given below: A 1 B FORD AND MSFT RETURN STATISTICS, 2005-2014 C FORD MSFT 23456789 Date return return 31-Dec-05 112.92% -0.93% 31-Dec-06 -52.92% 15.82% 5 31-Dec-07 -43.44% 20.85% 31-Dec-08 -5.91% -44.37% 31-Dec-09 -5.83% 60.40% 31-Dec-10 53.33% -6.52% 31-Dec-11 -48.14% -4.52% 10 31-Dec-12 -11.38% 5.83% 11 31-Dec-13 4.73% 44.29% 12 31-Dec-14 -32.90% 27.54% a. Calculate the mean return and the standard deviation of each stock. Also calculate the correlation coefficient between the two stocks. b. Show a regression that describes the relationship between the returns of the two stocks. c. How would you construct a portfolio from those two stocks that yields 8% mean return?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:7. (Statistics of two stocks, regression) Consider the returns for Ford and MSFT
stocks given below:
A
1
B
FORD AND MSFT
RETURN STATISTICS, 2005-2014
C
FORD
MSFT
23456789
Date
return
return
31-Dec-05
112.92%
-0.93%
31-Dec-06
-52.92%
15.82%
5
31-Dec-07
-43.44%
20.85%
31-Dec-08
-5.91%
-44.37%
31-Dec-09
-5.83%
60.40%
31-Dec-10
53.33%
-6.52%
31-Dec-11
-48.14%
-4.52%
10
31-Dec-12
-11.38%
5.83%
11
31-Dec-13
4.73%
44.29%
12
31-Dec-14
-32.90%
27.54%
a.
Calculate the mean return and the standard deviation of each stock.
Also calculate the correlation coefficient between the two stocks.
b. Show a regression that describes the relationship between the returns
of the two stocks.
c. How would you construct a portfolio from those two stocks that
yields 8% mean return?
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