finance assignment

Assignment 8 – Evaluating sensitivity to risk

Due: November 29, 2016

Select three companies from different industries.  Each company must have stock prices continuously available for January 1, 2011 through November 1, 2016. Obtain monthly prices for the companies for the period indicated.

For each stock, select two different variables from the file: fall 2016 assignment 8 data.xlsx. (Do not use the same variable more than once.)

Using returns on the stock and returns or percentage changes for each selected variable (separately), determine the sensitivity of the stock price (i.e., company value) to each selected variable. (Note that for a few variables you will not be able to use all the stock returns. E.g., for vehicle miles traveled, data is only available through September 2016).

For each stock and each variable, indicate:

1. how a 1% change in the variable is expected to affect the value of the company;

2. whether the relationship between the selected variable and the value of the corporation is statistically significant (and explain how you make that determination);

3. whether the natural risk associated with the selected variable is long or short (e.g., does it cause the company’s value to increase or decrease); and

4. how much stock return volatility can be eliminated if the risk associated with the selected variable were entirely eliminated.