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Investment Problem/Graph

5. In an effort to track the local economy Finance 327 has decided to create a San Diego stock market index. The index will be made up of four local stocks Sempra Energy (Ticker Symbol: SRE), Jack in the Box (JBX), Qualcomm (QCOM) and Diversa (DVSA). Download the historical prices from January 1, 2006 through December 31, 2006 from Yahoo Finance to complete the exercise.

a. Plot the daily adjusted closing price data for each local stock on a single graph.
b. Calculate the holding period return for each security over the entire year.
c. Calculate a price weighted index and plot the value of this index. Assign a starting index value of 100.
d. Calculate the holding period return for the price weighted index over the entire sample period.
e. Go to Yahoo Finance to determine how many shares are outstanding for each stock. Use this data to calculate a market weighted index and plot the value of this index on the same graph as the price weighted index. Assign a starting index value of 100.
f. Calculate the holding period return for the market weighted index over the entire sample period.

Solution Summary

The solution graphs Yahoo's finance data. The daily adjusted closing price data, and holding period of return is plotted, as well as the weighted index plot and marketed weighted index.

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