Finance

Finance

Use the Ca.finance.yahoo.com website, search Bank of Nova Scotia and Barrick Gold Corporation by finding their stock symbols.  Once found, find historical prices (on the left-hand tab) and complete the following for each of the 2 stocks (create one single spreadsheet for both stock returns):
1.    On what stock exchange are the stocks listed and when they became public?
2.    Download historical data for the both companies’ stock prices (close) from Jan 01, 2005 through Dec 31, 2014, on a monthly basis (make sure you have 120 observations for each). Calculate returns for both series of prices downloaded from Yahoo site (Bank of Nova Scotia and Barrick Gold Corporation). Prior to that, make sure the data is sorted in ascending order, i.e. first row has the oldest data).  The final spreadsheet should have the 2 series of returns you downloaded and calculated returns for each.
3.    Create a table that calculates Expected returns and standard deviations for portfolios formed by combining the 2 stocks while changing weights in 10 percent increments (i.e. start with 100 percent in Bank of Nova Scotia and 0 percent in Barrick, then next line is 90 percent in Bank of Nova Scotia and 10 percent in Barrick, and so on, until 100 percent is invested in Barrick and 0 percent in Bank of Nova Scotia).
4.    Copy and paste the excel table that shows all results (including the average returns, standard deviations as well as covariance and correlation of the 2 series of returns for Bank of Nova Scotia and Barrick) in a word document that has your name on it and will be submitted for grading.  Do not print data, no need to submit it.
5.    Create a chart in excel that has standard deviation on X axis and expected return on the Y axis (that will be the Efficient Frontier created by combining these 2 stocks).  Copy and paste the table into your word assignment after you have correctly labeled the axes and added a name to the graph.
6.    Identify the minimum variance portfolio.

Using the same data compiled above, add the prices (and then calculate returns) for the S&P-TSX over the same period (also on a monthly basis).  Assume the annualized T-Bill return was 3% over the calculation period.
Calculate, by inserting a new column for each series, the risk premiums for each.  Make sure you express all returns in same units of time before subtracting.

Using the Tools menu in excel (tool Pack has to be installed if excel does not show it) perform 2 regression analyses using the Market Model: for Bank of Nova Scotia and Barrick Gold Corporation.
Clearly provide the regression results in a table with explanation for the coefficients obtained, and clear interpretation. Specifically, for each regression provide:
•    Dependent Variable
•    Independent Variable
•    Intercept
•    Beta Value
•    Firm Specific Risk
•    For which stock does the market movement explains a greater fraction of return variability?
•    Which stock had a higher average rate of return in excess of that predicted by CAPM?
•    Standard deviation of each stock returns (using the equation for R2 =β2σM2/σ2, and the individual regression results for each stock).
•    For each stock calculate systematic risk and firm specific risk
•    Compare each of your beta values with the ones reported by Yahoo Finance site.  Are they different?  Provide explanation for the difference.

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