Chapter 8 Problem 6 The following are the historic returns for the Chelle Computer Company: Year Chelle Computer General Index Year chelle computer general index 1 37 15 2 9 13 3 -11 14 4 8 -9 5 11 12 6 4 9 Based on this information‚ compute the following: a. The correlation coefficient between Chelle Computer and the General Index. Answer : r= .1305 b. The standard deviation for the company and the index
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Rf is the risk-free return rate‚ and Km is the return of the market portfolio. The "three factor" β is analogous to the classical β but not equal to it‚ since there are now two additional factors to do some of the work. SMB stands for "Small [market capitalization] Minus Big” and HML for "High [book-to-market ratio] Minus Low"; they measure the historic excess returns of small caps over big caps and of value stocks over growth stocks. These factors are calculated with combinations of portfolios composed
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RSM330 Assignment 2 – Group Work Due: March 20‚ 2015 in class & online Question 1: Fundamental Analysis (Total 20 Marks) (a) i. These two companies are both in the Auto Parts and Equipment industry. ii. The auto industry sells discretionary goods‚ which consumers can afford to purchase more of in a booming economy. Therefore these companies stocks are cyclical since their price can be affected by ups and downs in the economy. (b) Magma 2012 2013 2014 Net Profit Margin 4.6% 4.5% 5.1% Asset
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Questions and Analysis 1. What factors should Ameritrade management consider when evaluating the proposed advertising program and technology upgrades? Why? a. Opportunity Cost – Will Ameritrade benefit from spending money on advertising and technology upgrades more than the next best alternative and more than reinvesting the money. b. Debt-to-Equity Ratio – If this ratio is high then Ameritrade may be able to generate more equity and increase earnings by more than the cost then
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to market equity are higher than predicted by the security market line of the CAPM. These observations advise that size or the book to market ratio may be proxies of systematic risk not captured by the CAPM beta. μi = rf + (μm – rf) * ß + bs * SMB + bh * HML Fama and French find that stocks with high beta didn’t have consistently higher returns than stocks with low beta and this indicates that beta was not a useful measure under their model. Their model is based on research findings that sensitivity
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1. Methodology 1.1 Impact of Buy and Sell Recommendations We examined the effect of Barrons’ buy‚ sell and hold recommendations on stock prices‚ using the Brown and Warner (1985) standard event-study method to compute the daily abnormal returns. We used a two-step procedure to compute the average daily abnormal returns with stock price data from CRSP. First‚ we estimated the alpha and beta coefficients of each firm by using a single-factor market model. We used the days from –301 to –46 as the
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b. c. | | Null Hypothesis: MANUF has a unit root | | Exogenous: Constant | | | Lag Length: 0 (Automatic - based on SIC‚ maxlag=21) | | | | | | | | | | | | | | t-Statistic | Prob.* | | | | | | | | | | | Augmented Dickey-Fuller test statistic | -29.65726 | 0.0000 | Test critical values: | 1% level | | -3.436548 | | | 5% level | | -2.864165 | | | 10% level | | -2.568220 | | | | | | | | | | | | *MacKinnon (1996)
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This document includes the solutions for questions related to the material covered in class for Chapters 11‚ 12 and 13. Thus‚ you are not required to return this last problem set. Your work on the problem sets is over!!!! During last week of classes we will go over questions on the final exam. Please‚ do not forget to complete the teaching evaluations on-line at https://sete.unt.edu/ Corporate Finance: The Core (Berk/DeMarzo) Chapter 11 - Optimal Portfolio Choice Use the information for the question(s) below
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Chapter 9: Multifactor Models of Risk and Return. (QUESTIONS) 1. Both the capital asset pricing model and the arbitrage pricing theory rely on the proposition that a no-risk‚ no-wealth investment should earn‚ on average‚ no return. Explain why this should be the case‚ being sure to describe briefly the similarities and differences between CAPM and APT. Also‚ using either of these theories‚ explain how superior investment performance can be establish. Answer: Both the Capital Asset Pricing
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ABC analysis (Inventory) In supply chain‚ ABC analysis is an inventory categorization method which consists in dividing items into three categories‚ A‚ B and C: A being the most valuable items‚ C being the least valuable ones. This method aims to draw managers’ attention on the critical few (Aitems) and not on the trivial many (C-items). Prioritization of the management attention Inventory optimization is critical in order to keep costs under control within the supply chain. Yet‚ in order
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