Task 1
Visit http://help.yahoo.com/kb/index?page=content&y=PROD_FIN&locale=en_US&id=SLN2311 and read about how stock prices (and therefore returns) are adjusted for splits and dividends.
Task 2
Now determine the monthly return series for both stocks using the adjusted close prices. Keep this data within the tab. You can delete the Open, High, Low, Close and Volume data as we won’t be using this in the assignment. What is the mean and standard deviation of the returns for your two stocks?
Task 3
Visit yahoo finance again and download the monthly price data for the S&P/ASX-200 Index (^AXJO). Place this data in a separate tab on your spreadsheet and calculate the monthly returns.
Task 3
Now go to the RBA’s website (rba.gov.au) and download the monthly yields for bank-accepted-bills. Visit http://www.rba.gov.au/statistics/tables/index.html#interest_rates and choose ‘Interest Rates and Yields – Money Market – Monthly F1 [XLS]’
Ideally we would use this one-month Treasury Note data (FIRMMTN1) but there are gaps in this data. So we will use the 30 day bank-accepted bill as a proxy (FIRMMBAB30). Note that these rates are quotes as per annum rates.
Task 4
What are the differences between a bank-accepted-bill (BAB) and an Aust. Gov. Treasury note? Which would you expect to have the higher yield and why? What happens to these yields in a banking crisis? Can you find evidence on the RBA website to support your view?
Task 5
Conduct a Single Index Model regression for your two stocks return using the 30-day BAB as the risk-free rate. Use the S&P/ASX-200 Index as the market index. You should take care to make sure the data is correctly aligned. The Bank Bill yields are expressed as a percentage per annum. These will need to be converted into a monthly rate (divide by 1200).2 Include the regression results in each tab along with a graph of the SCL. You can get Excel to output the graph in the regression stage.
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