Economics 3343: Course Project
I. Topical Focus
Your project will be based upon analysis of a set of estimated regression models motivated by what is known as the Capital Asset Pricing Model (CAPM). I have provided a Brief Introduction to the CAPM and Factor Models, with an emphasis on some key econometric issues; you are STRONGLY ENCOURAGED to read through and ‘digest’ that material ASAP; each of the core six equations to be estimated for this project is described in this introduction. The remainder of this document assumes you indeed are sufficiently familiar/comfortable with this material.
Save your time - order a paper!
Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines
Order Paper Now
II. Data
Each student will use the following data to estimate the CAPM and factor models:
1. The excess return on the ‘market portfolio’ ( ) from the Fama and French Data Library.
2. The ‘change in risk premium’ ( ) measure given by the difference between the yields on Baa and Aaa rated bonds.
3. The ‘small minus big’ ( ) measure from the Fama and French Data Library.
4. The ‘high minus low ( ) measure from the Fama and French Data Library.
Note: various combinations of the above data will be used as the INDEPENDENT/EXPLANATORY variables in your estimated regression models.
You can download an EViews workfile with these data from the link in the ‘Course Project’ BB folder; the workfile is called ‘ec3343_cp_f2018_data.wf1’. Note: You should SAVE THE FILE to whatever directory/folder you plan on using to store items for this assignment. The EViews variable names for these data are: ‘er_mkt’ for the excess return on the market portfolio; ‘crp’ for the change in risk premium; ‘smb’ for the ‘small minus big’ size premium measure; and ‘hml’ for the ‘high minus low’ size premium measure. Note that these are monthly data and the sample period starts in July of 2001 and ends in December of 2012.
Each student has been assigned a different stock (a ‘security’ in the language of CAPM and factor models), such that each of you will be using different data for the DEPENDENT variable in your regression models. Each of these securities is a component of the S&P500 stock index. To see which stock you have been assigned, CLICK HERE. The link associated with your name will take you to a Yahoo Finance web site at which you can download the historical data you will need. Once you are at this site:
1. For the Time Period, enter ‘6/1/2001’ for the ‘Start Date’, ‘12/31/2012’ for the ‘End Date’, and then click the ‘Done’ button.
2. You should indicate that you want ‘Monthly’ data
3. Then click the ‘Apply’ button
4. After the site responds to your clicking the ‘Apply’ button, click the ‘Download Data’ button. This will allow you to download your download into a ‘Comma-Separated-Value’ (with the extension ‘csv) file which can be opened with Excel. CLICK HERE to see such a file with data on the ExxonMobil Corporation’s stock price. For a student assigned ExxonMobil’s stock for this project, the data series needed for the assignment would be in the last column under the heading ‘Adj Close’ (for ‘adjusted closing price,’ where the price at the end of trading is adjusted for dividends and stock splits.
I. Topical Focus
Your project will be based upon analysis of a set of estimated regression models motivated by what is known as the Capital Asset Pricing Model (CAPM). I have provided a Brief Introduction to the CAPM and Factor Models, with an emphasis on some key econometric issues; you are STRONGLY ENCOURAGED to read through and ‘digest’ that material ASAP; each of the core six equations to be estimated for this project is described in this introduction. The remainder of this document assumes you indeed are sufficiently familiar/comfortable with this material.
II. Data
Each student will use the following data to estimate the CAPM and factor models:
1. The excess return on the ‘market portfolio’ ( ) from the Fama and French Data Library.
2. The ‘change in risk premium’ ( ) measure given by the difference between the yields on Baa and Aaa rated bonds.
3. The ‘small minus big’ ( ) measure from the Fama and French Data Library.
4. The ‘high minus low ( ) measure from the Fama and French Data Library.
Note: various combinations of the above data will be used as the INDEPENDENT/EXPLANATORY variables in your estimated regression models.
You can download an EViews workfile with these data from the link in the ‘Course Project’ BB folder; the workfile is called ‘ec3343_cp_f2018_data.wf1’. Note: You should SAVE THE FILE to whatever directory/folder you plan on using to store items for this assignment. The EViews variable names for these data are: ‘er_mkt’ for the excess return on the market portfolio; ‘crp’ for the change in risk premium; ‘smb’ for the ‘small minus big’ size premium measure; and ‘hml’ for the ‘high minus low’ size premium measure. Note that these are monthly data and the sample period starts in July of 2001 and ends in December of 2012.
Each student has been assigned a different stock (a ‘security’ in the language of CAPM and factor models), such that each of you will be using different data for the DEPENDENT variable in your regression models. Each of these securities is a component of the S&P500 stock index. To see which stock you have been assigned, CLICK HERE. The link associated with your name will take you to a Yahoo Finance web site at which you can download the historical data you will need. Once you are at this site:
1. For the Time Period, enter ‘6/1/2001’ for the ‘Start Date’, ‘12/31/2012’ for the ‘End Date’, and then click the ‘Done’ button.
2. You should indicate that you want ‘Monthly’ data
3. Then click the ‘Apply’ button
4. After the site responds to your clicking the ‘Apply’ button, click the ‘Download Data’ button. This will allow you to download your download into a ‘Comma-Separated-Value’ (with the extension ‘csv) file which can be opened with Excel. CLICK HERE to see such a file with data on the ExxonMobil Corporation’s stock price. For a student assigned ExxonMobil’s stock for this project, the data series needed for the assignment would be in the last column under the heading ‘Adj Close’ (for ‘adjusted closing price,’ where the price at the end of trading is adjusted for dividends and stock splits.
