PRIN.OF CORPORATE FINANCE >BI<
12th Edition
ISBN: 9781260431230
Author: BREALEY
Publisher: MCG CUSTOM
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Chapter 13, Problem 18PS
Summary Introduction
To determine: The average abnormal return of the two stocks during the month of the earnings announcement.
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The following information relates to the prices and dividends of two stocks listed on the Ghana Stock Exchange as well as the average market returns.
Stock A
Stock B
Year
Price
Div
Price
Div
Market Returns
2011
20
0
11
0
0
2012
24
1.2
13
1.6
0.25
2013
26
0.5
17
0.5
0.18
2014
31
1
20
0.9
0.11
2015
33
1.5
23
1.2
0.12
2016
40
2
27
1.5
0.15
Required.
1. Calculate the annual returns for each stock (2012-2016)
2. Calculate the covariance between the stocks
3. Assuming the two stocks are equally weighted, calculate the portfolio return and portfolio risk
The following information relates to the prices and dividends of two stocks listed on the Ghana Stock Exchange as well as the average market returns.
Stock A
Stock B
Year
Price
Div
Price
Div
Market Returns
2011
20
0
11
0
0
2012
24
1.2
13
1.6
0.25
2013
26
0.5
17
0.5
0.18
2014
31
1
20
0.9
0.11
2015
33
1.5
23
1.2
0.12
2016
40
2
27
1.5
0.15
Required.
Calculate the annual returns for each stock (2012-2016)
Calculate the average returns for each of the stocks and the market
Calculate the covariance between the stocks
Assuming the two stocks are equally weighted, calculate the portfolio return and portfolio risk
During the eight weeks between July 22 and September 16 2016, Facebook's weekly stock returns were 2.4%, 1.0%, −0.2%, −1.1%, 1.1%, 1.2%, 0.5%, and 1.5%. Assume that the distribution of Facebook's weekly stock returns is stationary over time. Estimate Facebook's expected weekly stock return using the given historical return data. Round your answer to one decimal place (Answer Format Example: If you get an answer of 3.2%, then type 3.2 as your answer). Note: This sample of returns is very small by design to make computations easier. In a real world application, one would estimate means and standard deviations from a larger sample of data.
Chapter 13 Solutions
PRIN.OF CORPORATE FINANCE >BI<
Ch. 13 - Prob. 1PSCh. 13 - Prob. 2PSCh. 13 - Market efficiency True or false? The...Ch. 13 - Prob. 4PSCh. 13 - Prob. 5PSCh. 13 - Behavioral finance True or false? a. Most managers...Ch. 13 - Prob. 7PSCh. 13 - Prob. 8PSCh. 13 - Prob. 9PSCh. 13 - Market efficiency How would you respond to the...
Ch. 13 - Market efficiency Respond to the following...Ch. 13 - Market efficiency evidence Which of the following...Ch. 13 - Prob. 13PSCh. 13 - Prob. 14PSCh. 13 - Prob. 15PSCh. 13 - Market efficiency implications What does the...Ch. 13 - Prob. 17PSCh. 13 - Prob. 18PSCh. 13 - Prob. 19PSCh. 13 - Prob. 20PSCh. 13 - Prob. 21PSCh. 13 - Prob. 22PSCh. 13 - Prob. 23PS
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