Month Monthly Returns (%) Month Monthly Returns (%) Month Monthly Returns (%) En
ID: 2822798 • Letter: M
Question
Month
Monthly Returns (%)
Month
Monthly Returns (%)
Month
Monthly Returns (%)
Ended
Yahoo
S&P500
Ended
Yahoo
S&P500
Ended
Yahoo
S&P500
Dec-07
-13.241
-0.219
-0.692
Dec-06
-5.442
-5.018
1.403
Dec-05
-2.610
2.457
0.036
Nov-07
-13.794
-1.980
-4.182
Nov-06
2.544
1.767
1.899
Nov-05
8.818
8.806
3.778
Oct-07
15.861
24.632
1.590
Oct-06
4.193
18.534
3.257
Oct-05
9.249
17.595
-1.668
Sep-07
18.093
10.096
3.736
Sep-06
-12.314
6.174
2.575
Sep-05
1.561
10.650
0.810
Aug-07
-2.237
1.029
1.497
Aug-06
6.227
-2.087
2.376
Aug-05
-0.060
-0.612
-0.912
Jul-07
-14.302
-2.430
-3.097
Jul-06
-17.758
-7.805
0.616
Jul-05
-3.781
-2.172
3.717
Jun-07
-5.470
4.979
-1.660
Jun-06
4.463
12.778
0.133
Jun-05
-6.855
6.088
0.143
May-07
2.354
5.628
3.486
May-06
-3.630
-11.035
-2.875
May-05
7.826
26.032
3.179
Apr-07
-10.387
2.885
4.428
Apr-06
1.612
7.164
1.342
Apr-05
1.770
21.877
-1.896
Mar-07
1.393
1.938
1.116
Mar-06
0.624
7.551
1.244
Mar-05
5.051
-3.979
-1.769
Feb-07
9.007
-10.379
-1.950
Feb-06
-6.735
-16.188
0.271
Feb-05
-8.350
-3.900
2.103
Jan-07
10.846
8.908
1.511
Jan-06
-12.264
4.291
2.648
Jan-05
-6.555
1.468
-2.437
Question: (Use table above to solve)
Segregate the return data in the above table into bull and bear markets, using the S&P 500 index as the proxy for the market.
A.) What was the average return for the two companies during these two types of markets? What was the return for the S&P 500 index during those times?
B.) Using the average return measures in a), compute the beta for Yahoo and Google.
C.) According to these beta estimates, which company is riskier?
Month
Monthly Returns (%)
Month
Monthly Returns (%)
Month
Monthly Returns (%)
Ended
Yahoo
S&P500
Ended
Yahoo
S&P500
Ended
Yahoo
S&P500
Dec-07
-13.241
-0.219
-0.692
Dec-06
-5.442
-5.018
1.403
Dec-05
-2.610
2.457
0.036
Nov-07
-13.794
-1.980
-4.182
Nov-06
2.544
1.767
1.899
Nov-05
8.818
8.806
3.778
Oct-07
15.861
24.632
1.590
Oct-06
4.193
18.534
3.257
Oct-05
9.249
17.595
-1.668
Sep-07
18.093
10.096
3.736
Sep-06
-12.314
6.174
2.575
Sep-05
1.561
10.650
0.810
Aug-07
-2.237
1.029
1.497
Aug-06
6.227
-2.087
2.376
Aug-05
-0.060
-0.612
-0.912
Jul-07
-14.302
-2.430
-3.097
Jul-06
-17.758
-7.805
0.616
Jul-05
-3.781
-2.172
3.717
Jun-07
-5.470
4.979
-1.660
Jun-06
4.463
12.778
0.133
Jun-05
-6.855
6.088
0.143
May-07
2.354
5.628
3.486
May-06
-3.630
-11.035
-2.875
May-05
7.826
26.032
3.179
Apr-07
-10.387
2.885
4.428
Apr-06
1.612
7.164
1.342
Apr-05
1.770
21.877
-1.896
Mar-07
1.393
1.938
1.116
Mar-06
0.624
7.551
1.244
Mar-05
5.051
-3.979
-1.769
Feb-07
9.007
-10.379
-1.950
Feb-06
-6.735
-16.188
0.271
Feb-05
-8.350
-3.900
2.103
Jan-07
10.846
8.908
1.511
Jan-06
-12.264
4.291
2.648
Jan-05
-6.555
1.468
-2.437
Explanation / Answer
According to Beta estimates Google is more risky than Yahoo because the beta is higher for google( 1.255) with Yahoo(0.987)
A B C Month Monthly Returns (%) Using excel Average return =AVERAGE(A1:A36) Using excel Average return =AVERAGE(B1:B36) Using excel Average return =AVERAGE(C1:C36) Beta of YAHOO=COVARIANCE.P(A1:A36,C1:C36)/VAR.P(C1:C36) Beta of GOOGLE =COVARIANCE.P(B1:B36,C1:C36)/VAR.P(C1:C36) Ended Yahoo Google S&P500 YAHOO Google S&P500 YAHOO GOOGLE 1 7-Dec -13.241 -0.219 -0.69 -0.953 4.042 0.715 0.987 1.255 2 7-Nov -13.794 -1.98 -4.18 3 7-Oct 15.861 24.632 1.59 4 7-Sep 18.093 10.096 3.736 5 7-Aug -2.237 1.029 1.497 6 7-Jul -14.302 -2.43 -3.1 7 7-Jun -5.47 4.979 -1.66 8 7-May 2.354 5.628 3.486 9 7-Apr -10.387 2.885 4.428 10 7-Mar 1.393 1.938 1.116 11 7-Feb 9.007 -10.379 -1.95 12 7-Jan 10.846 8.908 1.511 13 6-Dec -5.442 -5.018 1.403 14 6-Nov 2.544 1.767 1.899 15 6-Oct 4.193 18.534 3.257 16 6-Sep -12.314 6.174 2.575 17 6-Aug 6.227 -2.087 2.376 18 6-Jul -17.758 -7.805 0.616 19 6-Jun 4.463 12.778 0.133 20 6-May -3.63 -11.035 -2.88 21 6-Apr 1.612 7.164 1.342 22 6-Mar 0.624 7.551 1.244 23 6-Feb -6.735 -16.188 0.271 24 6-Jan -12.264 4.291 2.648 25 5-Dec -2.61 2.457 0.036 26 5-Nov 8.818 8.806 3.778 27 5-Oct 9.249 17.595 -1.67 28 5-Sep 1.561 10.65 0.81 29 5-Aug -0.06 -0.612 -0.91 30 5-Jul -3.781 -2.172 3.717 31 5-Jun -6.855 6.088 0.143 32 5-May 7.826 26.032 3.179 33 5-Apr 1.77 21.877 -1.9 34 5-Mar 5.051 -3.979 -1.77 35 5-Feb -8.35 -3.9 2.103 36 5-Jan -6.555 1.468 -2.44