Investment Simulation Experiment

Question 1

Go to the Industry Center in Yahoo Finance! Use the URL https://finance.yahoo.com/industries

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Choose an industry and a specific company within this industry. (Not IBM)

Briefly introduce the company you chose, including name, address, main products, stock price, volume, economic performance, etc. The purpose of doing it is to inform me of what kind of company you chose.

Report the descriptive statistics of the adjusted prices of the company, including Mean, SE, Median, Skewness, Kurtosis, Min, Max, Count, etc. (Download monthly data, five years)

Draw Line Chart (Time Series) and Histogram of you data.

Question 2

Estimate the single-index model and explain the coefficients

o Download weekly data, two years.

o Calculate the rate of return on both the stock you chose and S&P500

o Report and explain R-square and standard error

o Report and explain the economic meaning of the coefficients α and β

o Report and explain t-stat and p-value of the coefficients α and β

o Draw residual plot and line fit plot

Question 3

Using the Historical Prices option, you are required to download stock data of Amazon (AMZN) and Starbucks (SBUX).

o Monthly data, from Jan 1st, 2010 to Jan 1st, 2018. There are 96 observation.

o We only make use of the Adj Close price.

o Assume that the return on risk-free asset is the return on S&P 500.

Using these data to allocate your money across these two risky assets.

o That is, you are required to solve for wAMZN and wSBUX. For more information on Investment Simulation Experiment check out : https://www.youtube.com/watch?v=Q5Fw2IRMjPQ

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