Measuring Stock Market Risk

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Case Problem 1: Measuring Stock Market Risk

As indicated by the case study S&P 500 index was use as a measure of the total return for the stock market. Our standard deviation of the total return was used as a one measure of the risk of an individual stock. Also betas for individual stocks are determined by simple linear regression. The variables were: total return for the stock as the dependent variable and independent variable is the total return for the stock. Since the descriptive statistics were a lot, only the necessary data was selected (below table.)

A) Selected descriptive statistics follow:

Variable N Mean StDev Minimum Median Maximum Microsoft 36 0.00503 0.04537 -0.08201 0.00400 0.08883 Exxon Mobil 36 0.01664 0.05534 -0.11646 0.01279 0.23217 Caterpillar 36 0.03010 0.06860 -0.10060 0.04080 0.21850 Johnson & Johnson 36 0.00530 0.03487 -0.05917 -0.00148 0.10334 McDonald’s 36 0.02450 0.06810 -0.11440 0.03700 0.18260 Sandisk 36 0.06930 0.19540 -0.28330 0.07410 0.50170 Qualcomm 36 0.02840 0.08620 -0.12170 0.03870 0.21060 Procter & Gamble 36 0.01059 0.03707 -0.05365 0.01333 0.08783 S&P 500 36 0.01010 0.02633 -0.03429 0.01034 0.08104

From the above data we can see that Exxon Mobil, Caterpillar, McDonald’s, Sandisk, Qualcomm, and Procter & Gamble had a higher mean monthly return than the market (as measured by the S&P 500). Microsoft and Johnson & Johnson had lower mean monthly returns....
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