Finance Project Part 2
Brianna Hofrock Gage Sanchez
Mohammed Sltan
PART TWO 1)
WMT AMZN BERK CCL Market Sharpe Ratio
Portfolio A 32.94% -12.88% 0% 0% 79.94% 57.92%
Portfolio B 0% 0% 61.26% 21.37% 17.37% 65.42%
Portfolio C 30.76% -12.03% 51.31% 17.9% 12.07% 72.01%
Market SR: .49485 2) F-F 3 Regression: SUMMARY OUTPUT
Regression Statistics Multiple R 1 R Square 1 Adjusted R Square 1 Standard Error 2.95E-16 Observations 1260 ANOVA
df SS MS F Significance F
Regression 3 444.018
5 148.00
62 1.71E+33 0
Residual 1256 1.09E-28 8.68E-
32
Total 1259 444.018
5
Coefficients Standard Error t Stat P-value Lower 95%
Upper 95%
Lower 95.0%
Upper 95.0%
Intercept 2.08E-17 8.33E-18 2.5020
82 0.012473 4.50E-18 3.72E-1
7 4.50E-18 3.72E-17
Market 0.771319 1.11E-17 6.95E+
16 0 0.771319 0.77131
9 0.771319 0.771319 SML 5.55E-18 1.75E-17 0.3167 0.751521 -2.90E-17 3.99E-1 -2.90E-17 3.99E-17
Brianna Hofrock Gage Sanchez
Mohammed Sltan
04 7
HML 5.96E-18 1.79E-17 0.3329
52 0.739226 -2.90E-17 4.11E-1
7 -2.90E-17 4.11E-17 F-F 3 Return: 4.63% 3)
F-F 3 Alpha: 9.8% 1)
SR Rankings: Portfolio C: .72007 Portfolio B: .65418 Portfolio A: .57916 The Sharpe Ratio finds the optimal portfolio with the highest return for the least risk.
2)
Largest positive weight: Berkshire with a weight of 51.3%. We found this stock to have alpha in part one, so our findings match. Largest negative weight: Amazon with a weight of -12%.
3) FF3 Alpha .098
CAPM Alpha .048 For this we returned a higher Fama-French Alpha than our CAPM Alpha. We have a FF Beta with respect to the market of .77 which is statistically significant at 99%. Furthermore, we have HML & SMB beta of essentially zero, although they are not significant at the 5% level.
Brianna Hofrock Gage Sanchez
Mohammed Sltan
PART ONE Amazon
● Daily Average: 0.14% ● Annual Average: 34.26% ● Daily SD: 1.83% ● Annualized SD: 28.96% ● Alpha: 0.000659 ● P-Value Alpha: 0.142221 ● Beta: 1.195803 ● P-Value Beta: 1.05E-80 ● R Square: 0.250637
At the 95% confidence level, we can be confident that the actual Beta value is not equal to zero, but we cannot prove that Alpha is not zero. Berkshire
● Daily Average: 0.06% ● Annual Average: 15.96% ● Daily SD: 0.86% ● Annualized SD: 13.62% ● Alpha: 0.000661 ● P-Value Alpha: 0.006735 ● Beta: -0.04468 ● P-Value Beta: 0.158601 ● R Square: 0.001582
At the 95% confidence level, we cannot be confident that the Beta is not equal to zero, but we can be confident that Alpha is greater than zero. Wal-Mart
● Daily Average: 0.04% ● Annual Average: 11.10% ● Daily SD: 1.08% ● Annualized SD: 17.03% ● Alpha: 0.000112 ● P-Value Alpha: 0.690883 ● Beta: 0.548278 ● P-Value Beta: 4.56E-47 ● R Square: 0.152412
Brianna Hofrock Gage Sanchez
Mohammed Sltan
At the 95% confidence level, we can be confident that the actual Beta is not equal to zero, but we cannot prove that Alpha is not zero. Carnival Corp.
● Daily Average: 0.05% ● Annual Average: 11.43% ● Daily SD: 22.99% ● Alpha: -0.00018 ● P-Value Alpha: .600524 ● Beta: 1.061262 ● P-Value Beta: .000000 ● R Square: .313278
At the 95% confidence level, we can be confident that the actual Beta value is not equal to zero, but we cannot prove that Alpha is not zero. Correlations Walmart & Amazon: .146988 Berkshire & Carnival: .023304 The correlation of approx .147 between Walmart and Amazon reflects a statistically significant relationship between them since they are in same industry. However, Berkshire and Carnival correlation of .023304 is showing a very weak correlation between the two since they are not in the same business
Brianna Hofrock Gage Sanchez
Mohammed Sltan