UAE stocks
1.Choose any stock market of the world. Preferably from UAE.
2.Choose two industry groups,
3.Choose about 7 companies in each industry group. So total 14 companies
4.Try to take different industry groups. If any of the industry group matches with the choice of the other person then choose different companies in that industry group.
5.From market data record the last two years’ daily closing stock prices
6.Convert prices of stocks into daily log returns.
7.Take last two years daily data for risk free rate which would be yield of govt. Treasury bill preferably the 3 month Treasury bill.
8.Calculate the daily excess return for each stock using the risk free rate.
9.Take a market index which should represent the market you have chosen.
10.Calculate daily log returns of this market index
11.Calculate the daily market risk premium
12.Now for each stock estimate the Beta by fitting the CAPM model which means you will regress the excess returns of each stock on the market risk premium with the condition that intercept estimate will be 0.
13.Regress the excess returns of each stock on the market risk premium but without putting any condition on the intercept estimate which is called alpha
14.Now by using these estimates of Beta and alpha comment on the performance of stocks and if stocks are outperforming the CAPM model or underperforming.
15.Compare two industries group on the basis of your results.
16.Prepare a small report and submit it through blackboard along with the excel sheet of calculations.
17.Report should be double spaced with Times New Roman font of size 12.
