EF8914 Assignment 1

In the excel file stocks_m.xlsx, you will find monthly stock price indices for different
stocks and SP500, as well as the 3-month T-bill rate.
1. Compute the log returns for each stock series and SP500.
Provide descriptive statistics, including mean, standard deviation, skewness, and
kurtosis, for the returns and present them in a table. Do you find any stylized
features of stock returns (discuss the descriptive statistics)?
2. (optional)Run the regression of the CAPM model (with SP500 as the market
portfolio) for each stock and obtain the estimates of alpha, beta, sigma (standard
deviation of the error term), and the t-values of alpha and beta, the standard
deviation from the sigma. Here is the link to the Matlab program that does the
similar thing as this question:
http://www.mathworks.com/products/finance/demos.html?
file=/products/demos/shipping/finance/capmdemo.html
The output of your regressions should look like this:
Alpha
Beta
Sigma
----------------------------------------------------------------------------------Dell xxxx ( t-value) xxxx(t-value) xxxx ( standard deviation)
Microsoft
Ford
GE
IBM
Intel
Johnson
Merk
-----------------------------------------------------------------------------------3. How does the CAPM model perform for the stocks examined? (Is alpha 0? Is beta
significantly positive?)
Note: You are required to submit the Matlab M file that produces the results.