Construct Scatter Diagrams - Correlation Coefficient - Accounting and Finance Assignment Help

Assignment Task :

The Assignment 

1) Collect monthly US price data for 4 equities, each from a different industry from UK Yahoo Finance, see above for notes on the Yahoo data. Consult "List of S&P 500 Companies" on Wikipedia for a list of suitable equity stocks and their industry classification. You should select stocks that have at least 8 years of recent data and the most recent observation must not be after 28 February 2020. The choice of the specific time span is yours. You should nevertheless be aware that these data (and the Fama French data provided) will be used throughout this assignment. Note that no two submissions by different students should not consider precisely the same set of equities. 

2) Convert the (adjusted Close price) data for each stock into periodic returns and provide a brief description. This should include descriptive statistics that you think are relevant, presented in a table. Do not copy and paste statistics. 

3) Construct scatter diagrams (XY-plots) of the returns on your four chosen stocks (one graph for each stock) against the market return. Calculate the correlation coefficient between each of the stock’s returns against the market return. Interpret your results. Note that if your correlation coefficients between you stock returns and the “market” returns look wrong it is probably due to not matching the Fama French and Yahoo data correctly. If this is the case, it is worth correcting your data.

4) Do your results provide support for the 5 factor Fama French model? Comment on any statistics that are relevant to the validity of the model. 

5) Examine your regressions and conduct appropriate tests to determine if your data and the regression model violate any CLRM assumptions. Explain the tests that you have performed and present the results that you have obtained. For each CLRM assumption tested, explain what the implications would be if your data violated this assumption and how you would resolve the problem? 

6) Use appropriate tests to determine if your stock data contains a unit root. Explain the tests that you have performed and present the results that you have obtained. What is your conclusion, does your stock data contain a unit root? If these data did have a unit root, what are the implications?

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