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# hw6 - ORIE 4630 D Ruppert Homework#6 due Friday Oct 8 2010...

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ORIE 4630 — D. Ruppert Homework #6 — due Friday, Oct 8, 2010 Note: Students are required to work independently on homework. In this assignment, you will fit a one-factor model with the excess returns on the market as the factor. The S&P500 will be a proxy for the market portfolio and the 90-day Treasury rate will serve as the risk-free rate. This assignment uses the data set Stock_FX_Bond_2004_to_2006.csv . This data set contains a subset of the data used in Homework #5 with the risk-free rate (90-day Treasury rate) added. The R commands needed to fit a factor model will be given in small groups so that they can be explained better. First run the following commands to read the data, extract the prices, and find the number of observations: dat = read.csv("Stock_FX_Bond_2004_to_2006.csv",header=T) prices = dat[,c(5,7,9,11,13,15,17,24)] n = dim(prices)[1] Next, run these commands to convert the risk-free rate to a daily rate, compute net returns, extract the Treasury rate and compute excess returns for the market and for 7 stocks.

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hw6 - ORIE 4630 D Ruppert Homework#6 due Friday Oct 8 2010...

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