Question
In: Finance
Month Monthly Returns (%) Month Monthly Returns (%) Month Monthly Returns (%) Ended Yahoo Google S&P500...
|
Month |
Monthly Returns (%) |
Month |
Monthly Returns (%) |
Month |
Monthly Returns (%) |
||||||
|
Ended |
Yahoo |
|
S&P500 |
Ended |
Yahoo |
|
S&P500 |
Ended |
Yahoo |
|
S&P500 |
|
Dec-07 |
-13.241 |
-0.219 |
-0.692 |
Dec-06 |
-5.442 |
-5.018 |
1.403 |
Dec-05 |
-2.610 |
2.457 |
0.036 |
|
Nov-07 |
-13.794 |
-1.980 |
-4.182 |
Nov-06 |
2.544 |
1.767 |
1.899 |
Nov-05 |
8.818 |
8.806 |
3.778 |
|
Oct-07 |
15.861 |
24.632 |
1.590 |
Oct-06 |
4.193 |
18.534 |
3.257 |
Oct-05 |
9.249 |
17.595 |
-1.668 |
|
Sep-07 |
18.093 |
10.096 |
3.736 |
Sep-06 |
-12.314 |
6.174 |
2.575 |
Sep-05 |
1.561 |
10.650 |
0.810 |
|
Aug-07 |
-2.237 |
1.029 |
1.497 |
Aug-06 |
6.227 |
-2.087 |
2.376 |
Aug-05 |
-0.060 |
-0.612 |
-0.912 |
|
Jul-07 |
-14.302 |
-2.430 |
-3.097 |
Jul-06 |
-17.758 |
-7.805 |
0.616 |
Jul-05 |
-3.781 |
-2.172 |
3.717 |
|
Jun-07 |
-5.470 |
4.979 |
-1.660 |
Jun-06 |
4.463 |
12.778 |
0.133 |
Jun-05 |
-6.855 |
6.088 |
0.143 |
|
May-07 |
2.354 |
5.628 |
3.486 |
May-06 |
-3.630 |
-11.035 |
-2.875 |
May-05 |
7.826 |
26.032 |
3.179 |
|
Apr-07 |
-10.387 |
2.885 |
4.428 |
Apr-06 |
1.612 |
7.164 |
1.342 |
Apr-05 |
1.770 |
21.877 |
-1.896 |
|
Mar-07 |
1.393 |
1.938 |
1.116 |
Mar-06 |
0.624 |
7.551 |
1.244 |
Mar-05 |
5.051 |
-3.979 |
-1.769 |
|
Feb-07 |
9.007 |
-10.379 |
-1.950 |
Feb-06 |
-6.735 |
-16.188 |
0.271 |
Feb-05 |
-8.350 |
-3.900 |
2.103 |
|
Jan-07 |
10.846 |
8.908 |
1.511 |
Jan-06 |
-12.264 |
4.291 |
2.648 |
Jan-05 |
-6.555 |
1.468 |
-2.437 |
Question: (Use table above to solve)
Segregate the return data in the above table into bull and bear markets, using the S&P 500 index as the proxy for the market.
A.) What was the average return for the two companies during these two types of markets? What was the return for the S&P 500 index during those times?
B.) Using the average return measures in a), compute the beta for Yahoo and Google.
C.) According to these beta estimates, which company is riskier?
Solutions
Expert Solution
According to Beta estimates Google is more risky than Yahoo because the beta is higher for google( 1.255) with Yahoo(0.987)
| A | B | C | |||||||
| Month | Monthly Returns (%) | Using excel Average return =AVERAGE(A1:A36) | Using excel Average return =AVERAGE(B1:B36) | Using excel Average return =AVERAGE(C1:C36) | Beta of YAHOO=COVARIANCE.P(A1:A36,C1:C36)/VAR.P(C1:C36) | Beta of GOOGLE =COVARIANCE.P(B1:B36,C1:C36)/VAR.P(C1:C36) | |||
| Ended | Yahoo | S&P500 | YAHOO | S&P500 | YAHOO | ||||
| 1 | 7-Dec | -13.241 | -0.219 | -0.69 | -0.953 | 4.042 | 0.715 | 0.987 | 1.255 |
| 2 | 7-Nov | -13.794 | -1.98 | -4.18 | |||||
| 3 | 7-Oct | 15.861 | 24.632 | 1.59 | |||||
| 4 | 7-Sep | 18.093 | 10.096 | 3.736 | |||||
| 5 | 7-Aug | -2.237 | 1.029 | 1.497 | |||||
| 6 | 7-Jul | -14.302 | -2.43 | -3.1 | |||||
| 7 | 7-Jun | -5.47 | 4.979 | -1.66 | |||||
| 8 | 7-May | 2.354 | 5.628 | 3.486 | |||||
| 9 | 7-Apr | -10.387 | 2.885 | 4.428 | |||||
| 10 | 7-Mar | 1.393 | 1.938 | 1.116 | |||||
| 11 | 7-Feb | 9.007 | -10.379 | -1.95 | |||||
| 12 | 7-Jan | 10.846 | 8.908 | 1.511 | |||||
| 13 | 6-Dec | -5.442 | -5.018 | 1.403 | |||||
| 14 | 6-Nov | 2.544 | 1.767 | 1.899 | |||||
| 15 | 6-Oct | 4.193 | 18.534 | 3.257 | |||||
| 16 | 6-Sep | -12.314 | 6.174 | 2.575 | |||||
| 17 | 6-Aug | 6.227 | -2.087 | 2.376 | |||||
| 18 | 6-Jul | -17.758 | -7.805 | 0.616 | |||||
| 19 | 6-Jun | 4.463 | 12.778 | 0.133 | |||||
| 20 | 6-May | -3.63 | -11.035 | -2.88 | |||||
| 21 | 6-Apr | 1.612 | 7.164 | 1.342 | |||||
| 22 | 6-Mar | 0.624 | 7.551 | 1.244 | |||||
| 23 | 6-Feb | -6.735 | -16.188 | 0.271 | |||||
| 24 | 6-Jan | -12.264 | 4.291 | 2.648 | |||||
| 25 | 5-Dec | -2.61 | 2.457 | 0.036 | |||||
| 26 | 5-Nov | 8.818 | 8.806 | 3.778 | |||||
| 27 | 5-Oct | 9.249 | 17.595 | -1.67 | |||||
| 28 | 5-Sep | 1.561 | 10.65 | 0.81 | |||||
| 29 | 5-Aug | -0.06 | -0.612 | -0.91 | |||||
| 30 | 5-Jul | -3.781 | -2.172 | 3.717 | |||||
| 31 | 5-Jun | -6.855 | 6.088 | 0.143 | |||||
| 32 | 5-May | 7.826 | 26.032 | 3.179 | |||||
| 33 | 5-Apr | 1.77 | 21.877 | -1.9 | |||||
| 34 | 5-Mar | 5.051 | -3.979 | -1.77 | |||||
| 35 | 5-Feb | -8.35 | -3.9 | 2.103 | |||||
| 36 | 5-Jan | -6.555 | 1.468 | -2.44 | |||||
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