Stock Regression analysis
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1. (18 points) The spreadsheet "Two_factor_model" displays the monthly data for excess return on the market (MKTRF), risk-free interest rate (RF), and the momentum factor (UMD). Pick up two stocks randomly and get their monthly price data from Yahoo! Finance for the period December 1999 - December 2004.
a) Calculate the stocks' monthly return and run the following regression:
Note that here risk-free rate is not constant, but changes for each month.
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Solution Summary
The expert calculates the stock's monthly return and runs a regression analysis.
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Hello!
In order to calculate the regression in Excel, we must first arrange the data.
I've created a new sheet called Data for Regressions. In it I calculated the excess returns for each stock, and included the data for market returns and UMD. Notice that the "Excess Returns" for each stock are simple their monthly returns minus the prevailing riskfree rate, which ...
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