# Finance Case

I have a finance case with the following queations:

[url removed, login to view] is often estimated by linear regression. A model often used is called the market model, which is

R1-Rft= &#945;i+&#946;i [ Rmt- Rft] + €t’

In this regression, Rt is the return on the stock and Rft is the risk-free rate for the same period. Rmt is the return on a stock market index such as the S&P 500 Index. &#945; i is the regression intercept, and &#946;i is the slope (and the stock’s estimated beta). €t represents the residuals for this particular regression. What do you think is the motivation for this particular regression? The intercept &#945;i , is often called Jensen’s alpha. What does it measure? If an asset has a positive Jensen’s alpha, where would it plot with respect to the SML? What is the financial interpretation of the residuals in the regression?

[url removed, login to view] the market model to estimate the beta for Colgate-Palmolive using the last 36 months of returns (the regression procedure in Excel is one easy way to do this). Plot the monthly returns on Colgate-Palmolive against the index and also show the fitted line.

[url removed, login to view] the beta of a stock is calculated using monthly returns, there is a debate over the number of months that should be used in the calculation. Rework the previous questions using the last 60 months of returns. How does this answer compare to what you calculated previously? What are some arguments for and against using shorter versus longer periods? Also, you’ve used monthly data, which are a common choice. You could have used daily, weekly, quarterly, or even annual data. What do you think are the issues here?

[url removed, login to view] your beta for Colgate-Palmolive to the beta you find on finance.yahoo.com. How similar are they? Why might they be different?

Kỹ năng: Tài chính

Về Bên Thuê:
( 4 nhận xét ) fargo, United States

Mã Dự Án: #1676358

## Đã trao cho:

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