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Finance: Stock analysis.

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1. The accompanying Excel file provides you with monthly price and dividend data for CVS Caremark (Ticker symbol: CVS) from Yahoo Finance. (If you want to see where the data came from, go to Yahoo Finance. Type in the ticker, CVS. Then, click historical prices.)

2. Expand the spreadsheet and compute monthly HPRs for each of the 24 months using the HPR formula

Make sure to include the dividends.
3. Calculate arithmetic and geometric mean monthly HPRs for CVS.

4. Continue to expand the spreadsheet to calculate the standard deviation of the monthly HPRs .

5. Calculate the annualized version of your answers from parts 3 and 4. Your answers should be the annualized versions of only the final answers of parts 3 and 4, not annualized versions of each monthly HPR.
You may notice the use a divisor of n-1 for calculation of variance and standard deviation instead of n. In statistics, this is appropriate if we have a sample of returns rather than the entire population of returns. While this difference is not a big deal if you have over 30 observations, it can make a difference if you have a modest number of monthly returns to work with. Use the divisor of n-1 for this exercise.

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Solution Summary

The problem deals with determining the Holding period return (HPR) from stock prices.

Solution provided by:
  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
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