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This week's discussion prompt is adapted from the RWJ Ch. 13 Minicase (pp. 456-457): After graduation, you begin a job with an investment firm. Your firm uses a commercial data vendor for information about its holdings. The vendor will not share how it calculates its numbers. Your bosses are uncomfortable with not knowing how these numbers are calculated and believe it could be less expensive to calculate the necessary statistics in-house. They have asked you to estimate a few commonly used statistics. The first statistic requested is beta. Beta is often estimated by linear regression. A model commonly used is called the market model, which is: RtRft=ai+bi[RMtRft]+et In this regression, Rt is the return on the stock in period t,Rft is the risk-free rate in period t,RMt is the return on a stock market index such as the S\&P 500 in period t, and bi is the slope (and the stock's estimated beta). To start, you will estimate the beta of Campbell Soup Company (ticker: CPB). You have already compiled the returns data necessary for your analysis. Click here to download the data . Dart 1: Use the market model to estimate the beta of Campbell Soup using the most recent 60 onths of returns. What is Campbell Soup's beta? What does your estimate tell you about the level of systematic risk in Campbell Soup's stock? Here is a short review of how to estimate a market model in Excel: Part 2: When the beta is calculated using monthly returns, there is a debate over the number of months that should be used in the calculation. Rework the previous questions using the last 36 months of returns to estimate beta. How does this answer compare to what you calculated previously? Does Campbell Soup appear riskier or less risky using the shorter estimation window? What could account for the increase or decrease in risk during the more recent period? Part 3: Compare your beta for Campbell Soup to the beta you find on finance.yahoo.com. How similar are they? Spreadsheet: Along with your written responses to the questions, please upload the spreadsheet file you used to make your calculations. 2020092020102020112020122021012021022021032021042021052021062021072021082021092021102021112021122022012022022022032022042022052022062022072022082022092022102022112022122023012023022023030.080590.035150.0795580.033390.004960.047310.1053210.050130.0268520.063280.041020.03770.0019170.044490.0183650.077610.0151860.0278860.008890.0432390.0230470.0029220.0270550.028760.064710.1228780.008670.0573880.084930.0180640.0468390.039230.027670.0953870.0486340.011140.0260910.0424390.0524250.0054870.0222140.0227480.028990.047570.0691440.008330.0436130.052590.031360.0357730.087965.32E050.083920.0911160.042440.09340.0798630.0537530.058970.0617530.026110.0350520.00110.0010.00090.00090.00080.00040.00030.00020.00020.00040.00050.00050.00040.00050.00050.00060.00150.00330.00440.00760.00980.01490.02230.02630.03130.03720.04150.04250.04540.04650.0469 This week's discussion prompt is adapted from the RWJ Ch. 13 Minicase (pp. 456-457): After graduation, you begin a job with an investment firm. Your firm uses a commercial data vendor for information about its holdings. The vendor will not share how it calculates its numbers. Your bosses are uncomfortable with not knowing how these numbers are calculated and believe it could be less expensive to calculate the necessary statistics in-house. They have asked you to estimate a few commonly used statistics. The first statistic requested is beta. Beta is often estimated by linear regression. A model commonly used is called the market model, which is: RtRft=ai+bi[RMtRft]+et In this regression, Rt is the return on the stock in period t,Rft is the risk-free rate in period t,RMt is the return on a stock market index such as the S\&P 500 in period t, and bi is the slope (and the stock's estimated beta). To start, you will estimate the beta of Campbell Soup Company (ticker: CPB). You have already compiled the returns data necessary for your analysis. Click here to download the data . Dart 1: Use the market model to estimate the beta of Campbell Soup using the most recent 60 onths of returns. What is Campbell Soup's beta? What does your estimate tell you about the level of systematic risk in Campbell Soup's stock? Here is a short review of how to estimate a market model in Excel: Part 2: When the beta is calculated using monthly returns, there is a debate over the number of months that should be used in the calculation. Rework the previous questions using the last 36 months of returns to estimate beta. How does this answer compare to what you calculated previously? Does Campbell Soup appear riskier or less risky using the shorter estimation window? What could account for the increase or decrease in risk during the more recent period? Part 3: Compare your beta for Campbell Soup to the beta you find on finance.yahoo.com. How similar are they? Spreadsheet: Along with your written responses to the questions, please upload the spreadsheet file you used to make your calculations. 2020092020102020112020122021012021022021032021042021052021062021072021082021092021102021112021122022012022022022032022042022052022062022072022082022092022102022112022122023012023022023030.080590.035150.0795580.033390.004960.047310.1053210.050130.0268520.063280.041020.03770.0019170.044490.0183650.077610.0151860.0278860.008890.0432390.0230470.0029220.0270550.028760.064710.1228780.008670.0573880.084930.0180640.0468390.039230.027670.0953870.0486340.011140.0260910.0424390.0524250.0054870.0222140.0227480.028990.047570.0691440.008330.0436130.052590.031360.0357730.087965.32E050.083920.0911160.042440.09340.0798630.0537530.058970.0617530.026110.0350520.00110.0010.00090.00090.00080.00040.00030.00020.00020.00040.00050.00050.00040.00050.00050.00060.00150.00330.00440.00760.00980.01490.02230.02630.03130.03720.04150.04250.04540.04650.0469

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