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 onefactor model with the excess returns on the market
as the factor. The S&P500 will be a proxy for the market portfolio and the 90day Treasury
rate will serve as the riskfree 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 riskfree rate (90day 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 riskfree 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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 '10
 RUPPERT
 Statistics, Variance, excess returns

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