Posted: September 21st, 2016

Download 61 months (October 2008 to October 2013) of Apple Inc. data and 61 months (October 2008 to October 2013) of Exxon Mobil Corporation data. Download 60 months (November 2008 to October 2013) of the 13 week T-bill rate (symbol = ^IRX)

Download 61 months (October 2008 to October 2013) of monthly data for the S&P 500 index (symbol = ^GSPC). Download 61 months (October 2008 to October 2013) of Apple Inc. data and 61 months (October 2008 to October 2013) of Exxon Mobil Corporation data. Download 60 months (November 2008 to October 2013) of the 13 week T-bill rate (symbol = ^IRX). Be sure to use end-of-month data! Construct the following on a spreadsheet:
1. Calculate 60 months of returns for the S&P 500 index, Apple and Exxon. Use November 2008 to October 2013. Note this means you need price data for October 2008. On the answer sheet report the average monthly returns for the S&P 500 index, Apple and Exxon, as well as the average monthly risk-free rate.

2. Calculate excess returns for the S&P 500 index, Apple and Exxon. Note you must divide the annualized risk-free rate (^IRX) by 1200 to approximate the monthly rate in decimal form. On the answer sheet report the average monthly excess returns for the S&P 500 index, Apple and Exxon.

3. Regress excess Apple returns on the excess S&P 500 index returns and report, on the answer sheet, α, β, the r-square and whether α and β are different from zero at the 5% level of significance. Briefly explain your inference.

4. Decompose total risk for Apple into systematic risk and firm-specific risk. That is, calculate total risk, systematic risk and firm-specific risk for Apple.

5. Regress excess Exxon returns on the excess S&P 500 index returns and report, on the answer sheet, α, β, the r-square and whether α, β are different from zero at the 5% level of significance. Briefly explain your inference.

6. Decompose total risk for Exxon into systematic risk and firm-specific risk. That is, calculate total risk, systematic risk and firm-specific risk for Exxon.

7. Estimate the covariance and correlation of Apple and Exxon excess returns.