 |  Fundamentals of Investment Management, 7/e Geoffrey A. Hirt,
DePaul University
Stanley B. Block,
Texas Christian University
A Basic Look at Portfolio Management and Capital Market Theory
Stock Investor Pro QuestionsPlease use the AAII Stock Investor Pro to complete the following exercises.
1.On page 605, the beta coefficients for Compaq Computer and Piedmont Natural
Gas are given for May 2001 as 1.25 and 0.6, respectively. Using the
Screen Edit, isolate those companies that have the same SIC code as Compaq
and Piedmont and save them in separate portfolios. Create a View using the
View Editor showing the beta, and create a Statistical Summary Report using
this View to calculate the average beta for each of these portfolios/industries.
Create these reports for both of these portfolios/industries. Comment on
your findings. 2. On page 605, the beta coefficient as of May 2001 is shown for eight companies.
Find the beta for these companies in the Stock Investor Pro database.
What do you observe about the stability of a stock’s beta over time? What
conclusions may be drawn from these observations? 3. a. Select the stocks that meet the criteria specified in Chapter 10, Exercise
1a on page 291, using the Screen Editor, and rank the results based
on beta. Construct two portfolios from these companies—one with the
five highest beta stocks and the other with the five lowest beta stocks.
b. Determine the CAPM portfolio returns for these two portfolios using the
current rate on one-year Treasury bills as the risk-free rate and 6 percent
as the market-risk premium.
c. Look up the stocks’ prices exactly one year ago (Price _ M12) and compute
the percentage change over the past year. Compare the CAPM portfolio
return to the actual return offered by these portfolios. Did the
portfolios earn excess returns? |
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2003 McGraw-Hill Higher Education