PART A: CAPM
1? Pick any two stocks, corresponding market index, and download their
respective daily prices (Online Data Library), and calculate the simple
returns for the three assets. Data set has to include at least 252 observation,
but there is no upper limit for the observation period. Provide the descriptive
statistics, including the mean, variance, standard deviation, skewness, and
kurtosis, and comment on the differences between these three assets.
2? Plot the original returns and their respective moving averages (30-day
window) for each asset. Comment on the difference between these two time
series for each assets, and between the assets. Also, propose an optimal
trading strategy having in mind moving-average dynamics.
3? Plot the distribution of the returns using histogram and kernel density plot.
Comment on the shape of the distri-bution, and make a comparison
between the distribution of returns for the three assets.
4? Download some risk-free rate and add it to the data set. Estimate the CAPM
for each stock, and provide your interpretation of the results, by emphasizing
the difference in the estimated results.
5? Plot the Security Market Line (SML) for each stock, and interpret the results
(intuition, comparison, etc.).
PART B: French-Fama Factor Model
1. Download data for any two industry portfolio from Keneth R. French data
library (Online Data Library), and corresponding factors and risk-free rate.
Data set should include at least 252 observation, but there is no upper limit
for the number of observation. Provide the descriptive statistics for this data
set (mean, variance, standard deviation, skewness, kurtosis), and comment
on the differences between the two industry portfolios.
2. Plot the distribution of returns using histogram and kernel density plot.
Comment on the shape of the distribution, and compare the distribution of
returns for the two industry portfolio of your choice.
3. Estimate the three-factor French-Fama model for each industry portfolio,
and interpret the results (goodness-of-fit, significance, the meaning of the
estimated coefficients, etc.).

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