Project part 2

# Project part 2 - trend and industry averages for the...

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COMPANY ANALYSIS CONTENT I. Computing historical Portfolio Return and Standard Deviation 1. Choose an at least 5-stock portfolio (be sure to include the single company that you have been analyzing). From the WRDS database, choose the CRSP monthly return file. From this file, you can collect 60 months of stock returns (be sure each stock has 60 monthly returns). The ending period should be December 2008. You can choose whatever set of weights you wish (as long as they are all positive and sum to 1.0). Using the variance-covariance matrix calculate the standard deviation of your portfolio. 3. From the WRDS database main page (free access datasets), choose the Fama and French dataset and then Factors (upper right hand side of the page). Choose the excess return on the market and the one-month risk-free rate for the 60-month time period. Then compute the Sharpe measure for your portfolio and for the market index. II. Analysis of Company 1. Complete an analysis of your one company’s historical financial health using the 5-year
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Unformatted text preview: trend and industry averages for the following ratios: current ratio, total assets turnover, net profit margin, and equity multiplier. For each ratio, analyze the 5-year trend of the ratio (is the companys ratio improving or deteriorating?) and compare the companys ratio to the industry ratio for the 5-year period (does the companys ratio compare favorably or unfavorably with the industry?). 2. Calculate the companys beta using regression analysis. Provide the R 2 statistic and the t-statistic for the beta coefficient. Based on the beta and the information from the Fama-French data, compute the stocks expected return using CAPM. 3. Using Valueline data, calculate the companys intrinsic value using the dividend discount model. Clearly identify the assumptions underlying your calculations, and provide a rationale for your valuation model choice. How does the current market price compare to your computed intrinsic valuation?...
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