Go to www.mhhe.com/edumarketinsight. Use data from Market Insight to plot the characteristic lines for Toyota Motor Corporation (TM) and Seven-Eleven, Inc. (SE). Start by finding the one-month total returns of Toyota and the S&P 500 in the Monthly Adjusted Prices Report in the Excel Analytics, Market Data section. Copy the data into Excel, and then plot the Toyota Returns versus the S&P 500 returns. Use an XY Scatter Plot chart type, with no line joining the points. Select one of the data points, then right-click your mouse to get a shortcut menu which allows you to add a trend line. This is the characteristic line for Toyota. Repeat the process for Seven- Eleven. What conclusions can you draw about Toyota and Seven-Eleven based on their characteristic lines?
Go to www.mhhe.com/edumarketinsight. Use data from Market Insight to calculate the beta of Adobe Systems, Inc. (ADBE). Start by finding the monthly price changes of Adobe and the S&P 500 in Monthly Adjusted Prices Report in the Excel Analytics, Market Data section. Copy the data into Excel and confirm the monthly rates of return (based on closing prices) for each series. Using the entire period for which data are available, estimate a regression with Adobe's return as the dependent (Y) variable and the S&P 500 return as the independent (X) variable. Now repeat the procedure using only the most recent two years of data. Estimate a third regression using only the earliest two years of data. How stable is the beta estimate? Finally, compare your three results to the beta listed in Adobe's S&P Stock Report (in the S&P Stock Reports section). Do any of your results match the S&P Report's beta? What might explain the differences?
The S&P Report at www.mhhe.com/edumarketinsight gives a 12-month target price as of a certain date at the top of the first page. Enter the symbol for Adobe (ADBE) and follow the link to S&P's Stock Report on the company. Use finance.yahoo.com or another source to find the stock's price on the date the price projection was made (the "as of" date). Toward the bottom of the first page, the Stock Report provides dividend data. Using the information about prices and dividends, calculate the expected return on Adobe's stock based on these projections.
Go to www.mhhe.com/edumarketinsight. In the Excel Analytics section, find the monthly returns in the Monthly Adjusted Prices report for the following firms: Gap (GPS), Sony (SNE), Georgia Pacific (GP), Ansell (ANSLE), and Applebees (APPB). Copy the returns from these five firms into a single Excel workbook, with the returns for each company properly aligned. Then do the following:
Using the Excel functions for average (AVERAGE) and sample standard deviation (STDEV), calculate the average and the standard deviation of the returns for each of the firms.
Using Excel's correlation function (CORREL), construct the correlation matrix for the five stocks based on their monthly returns for the entire period. What are the lowest and the highest individual pairs of correlation coefficients?
