Consider F2:F7 with"non-positive" group(zeroth), how to calculate the realized returns of F2:F7?

Part 1. Analyzing the "Earning-to-Price" Effect [A] Use "data1981_ep.xIs" to form FOUR portfolios by stocks with +ve "Earning-to-Price" ratio - 1. Sort the stocks by "_RAT_EP" in ascending order - 2. Form Portfolio (Zero ") by the stocks with NON-POSITIVE _RAT_EP" - 3. Evenly divide the stocks with POSITIVE "_RAT_EP" into FOUR portfolios. > The 1st portfolio contains stocks with the smallest "_RAT_EP". > The 4th portfolio contains stocks with the largest "_RAT_EP". > If the number of stocks (n) is not divisible by (4), you add the remainder to the 4th portfolios; e.g. when (n=53), each of the 1st,2nd, and 3rd portfolios has 13 stocks; but the 4th portfolio has 14 stocks. - 4. Calculate the realized returns on the four portfolios over the next one year by assumption that each portfolio has equal weightings for its constituent stocks. - 5. Check any difference in the realized returns between the 1st portfolio (the smallest "RAT_EP") and the 4th portfolio (the largest "_RAT_EP") Note: DON'T delete any observation in our dataset! [B] Repeat Step 1. to Step 5. in Section [A] by other years' data ("data1982", ... , "data1995") to analyze the "Earning-to-Price" effect in other years. [C] Examine any "Earning-to-Price" effect in Hong Kong Stock Market over the 15 years, and interpret your results. How to Calculate Realized Returns on Low E/P Portfolio and High E/P Portfolio? - Calculate the realized return on each portfolio over the next one year by assumption that each has equal weightings for its constituent stocks. It can be shown that the return on a portfolio which is formed by n stocks is Rp=i=1N{(i=1N[NiPi,0]NiPi,0)Rt}=i=1N{wiRt} where Pi,0= Stock price of asset (ith) at the beginning of period; Pi,1= Stock price of asset (ith) at the end of period; Ni= Number of shares of asset (iih) in the portfolio; wi= Weighting of investment in asset (iih); Ri= Simple rate of return of asset (ith) for the time period; > As you are required to form portfolio with equal weighting (wi=1) for each stock, for each portfolio, you use the Excel function "=AVERAGE(...)" to calculate the average of "R_NEXT12M", which is the realized return on individual stock over next 12 months. - 4. Check any difference in the realized returns between the 1st portfolio ("Low E/P Portfolio") and the 4th portfolio ("High E/P Portfolio"); and check whether the return on "High E/P Portfolio" is higher than the "Low E/P Portfolio"? 5. Repeat the same procedure for the years from 1982 to 1995 to check the performance of the proposed "High E/P Portfolio". Part 1. Analyzing the "Earning-to-Price" Effect [A] Use "data1981_ep.xIs" to form FOUR portfolios by stocks with +ve "Earning-to-Price" ratio - 1. Sort the stocks by "_RAT_EP" in ascending order - 2. Form Portfolio (Zero ") by the stocks with NON-POSITIVE _RAT_EP" - 3. Evenly divide the stocks with POSITIVE "_RAT_EP" into FOUR portfolios. > The 1st portfolio contains stocks with the smallest "_RAT_EP". > The 4th portfolio contains stocks with the largest "_RAT_EP". > If the number of stocks (n) is not divisible by (4), you add the remainder to the 4th portfolios; e.g. when (n=53), each of the 1st,2nd, and 3rd portfolios has 13 stocks; but the 4th portfolio has 14 stocks. - 4. Calculate the realized returns on the four portfolios over the next one year by assumption that each portfolio has equal weightings for its constituent stocks. - 5. Check any difference in the realized returns between the 1st portfolio (the smallest "RAT_EP") and the 4th portfolio (the largest "_RAT_EP") Note: DON'T delete any observation in our dataset! [B] Repeat Step 1. to Step 5. in Section [A] by other years' data ("data1982", ... , "data1995") to analyze the "Earning-to-Price" effect in other years. [C] Examine any "Earning-to-Price" effect in Hong Kong Stock Market over the 15 years, and interpret your results. How to Calculate Realized Returns on Low E/P Portfolio and High E/P Portfolio? - Calculate the realized return on each portfolio over the next one year by assumption that each has equal weightings for its constituent stocks. It can be shown that the return on a portfolio which is formed by n stocks is Rp=i=1N{(i=1N[NiPi,0]NiPi,0)Rt}=i=1N{wiRt} where Pi,0= Stock price of asset (ith) at the beginning of period; Pi,1= Stock price of asset (ith) at the end of period; Ni= Number of shares of asset (iih) in the portfolio; wi= Weighting of investment in asset (iih); Ri= Simple rate of return of asset (ith) for the time period; > As you are required to form portfolio with equal weighting (wi=1) for each stock, for each portfolio, you use the Excel function "=AVERAGE(...)" to calculate the average of "R_NEXT12M", which is the realized return on individual stock over next 12 months. - 4. Check any difference in the realized returns between the 1st portfolio ("Low E/P Portfolio") and the 4th portfolio ("High E/P Portfolio"); and check whether the return on "High E/P Portfolio" is higher than the "Low E/P Portfolio"? 5. Repeat the same procedure for the years from 1982 to 1995 to check the performance of the proposed "High E/P Portfolio