project due at midnight finance class

FINA 396: Special Topics in Finance Project 1

Spring 2018 50 points

School of Business and Public Administration

University of the District of Columbia

Instructions: This project is worth 50 points. You can only discuss this project with me, but not

anyone else. Each individual needs to submit an Excel file via Blackboard. Due: by 11:59pm

on March 21, 2018 (Wednesday).

1. (20 points) Refer to the table below. The table below shows the annual returns (in

percentages) for 2 major market indices. For each index, calculate the arithmetic mean return and

the geometric mean return of full-year returns from 2005-2015. What is the relationship between

the arithmetic and geometric mean returns?

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Nasdaq

Composite Index 1.37 8.59 50.0 -31.5 -21.1 -39.3 85.6 39.6 21.6 22.7 39.9

Dow Jones

Industrial Average -0.61 3.15 25.3 -16.8 -7.1 -6.2 25.2 16.1 22.6 26.0 33.5

2. (30 points) (i) Estimate the stock beta for a company. Select a publicly traded company

(preferably large firms) and download the monthly closing prices for 5 years into Excel. Choose

a market index (e.g. S&P 500) and download the monthly closing values for 5 years into Excel.

Calculate the monthly returns for the selected company and the market index. Using the regression

function in Excel, regress the stock return on the market index return. (ii) Compare and contrast

the stock beta you estimated with two other sources (e.g. Yahoo! Finance, CNBC, etc.).