FINA 1007: Testing the CAPM theory You will use one Market Index and 12 Companies’ daily data: Research Methods Coursework, UOG, UK
|University||University of Greenwich (UOG)|
|Subject||FINA 1007: Research Methods|
This coursework involves testing the CAPM theory.
You will use one market index and 12 companies’ daily data and these companies should be from at least three different sectors. The sample period should be the latest 2 years in length (for example, from Jan 2014 to Jan 2016). The required data can be downloaded from Yahoo finance: http://uk.finance.yahoo.com/
Data collection for twelve companies
Considering three different sectors
Collecting Risk-free rate
1. Using data for the entire sample period, run a time-series regression for each of the selected companies. Specifically, regress each company return onto a constant and a market excess return. Verify, in each case, there exists a significant beta.
2. Report the t-statistic for alpha and the R-squared for each company.
3. Discuss your results and the merits and demerits of CAPM analysis.
4. Discuss whether your results are sensitive to sector characteristics.