Data Case

Data Case - According to CAPM Disney’s alpha should not...

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Yufan Yang 20120038 Andrew Chen 20057314 Saetbyeol Kim 20484539 1. Annualized Excess Returns APR (Disney-excess) = 10.29% APR (S&P 500-excess) = 5.28% 2. Beta of Disney = 0.9524 95% ConFdence Interval: 0.4730 --- 1.4319 [0.9524±0.4795] 3. Alpha of Disney = 0.004385 95% ConFdence Interval: -0.007866 --- 0.016636 [0.004385±0.012251] 4. Compare Beta with Beta from Yahoo Finance Beta from our calculation: 0.9524 Beta from Yahoo ±inance: 1.1800 5. Interpret Alpha Alpha is estimated to be 0.004385 , this implies that the historical performance of Disney’s security is very close to the expected return predicted by the security market line. Namely, the risk-adjusted measure of Disney stock’s historical performance is very close to 0 .
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Unformatted text preview: According to CAPM, Disney’s alpha should not be signiFcantly di f erent from zero. Moreover, if the market is perfectly e ffi cient, Disney’s alpha should be zero. • This alpha estimation for Disney is consistent with CAPM, even though it is not zero. This just implies that the market performance measured by S&P 500 is not perfectly e ffi cient, but it is very close to be perfectly e ffi cient. 6. Interpret R 2 • Adjusted R2 in the regression = 0.2007 • According to CAPM, R2 indicates the ratio of market risk over total risk of the Disney stock. This further implies that Disney’s Frm-speciFc risk is 4 times as large as the market risk measured by S&P 500 . DATA CASE #3 NOV.19TH, 2010...
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This note was uploaded on 05/04/2011 for the course BUS 103 taught by Professor Opp during the Fall '10 term at Berkeley.

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