Year Asset Return Average return Variance

1926 Large company stocks 13.75%

1927 Large company stocks 35.70%
1928 Large company stocks 45.08%
1929 Large company stocks -8.80%
1930 Large company stocks -25.13%
1931 Large company stocks -43.60%
1932 Large company stocks -8.75%
1933 Large company stocks 52.95%
1934 Large company stocks -2.31%
1935 Large company stocks 46.79% 10.57% 0.1118194973
1936 Large company stocks 32.49% 12.44% 0.1166564996
1937 Large company stocks -35.45% 5.33% 0.1305062423
1938 Large company stocks 31.63% 3.98% 0.1204335373
1939 Large company stocks -1.43% 4.72% 0.1188832988
1940 Large company stocks -10.36% 6.20% 0.1112677227
1941 Large company stocks -12.02% 9.35% 0.0862949604
1942 Large company stocks 20.75% 12.30% 0.0831292827
1943 Large company stocks 25.38% 9.55% 0.0658278823
1944 Large company stocks 19.49% 11.73% 0.0648362246
1945 Large company stocks 36.21% 10.67% 0.0577118877
1946 Large company stocks -8.42% 6.58% 0.0546104551
1947 Large company stocks 5.05% 10.63% 0.0331877551
1948 Large company stocks 4.99% 7.96% 0.0278514671
1949 Large company stocks 17.81% 9.89% 0.0275367862
1950 Large company stocks 30.05% 13.93% 0.0256837632
1951 Large company stocks 23.79% 17.51% 0.0178576867
1952 Large company stocks 18.39% 17.27% 0.0177434627
1953 Large company stocks -1.07% 14.63% 0.019974961
1954 Large company stocks 52.23% 17.90% 0.0342306846
1955 Large company stocks 31.62% 17.44% 0.0325740516
1956 Large company stocks 6.91% 18.98% 0.0261131379
1957 Large company stocks -10.50% 17.42% 0.0333437151
1958 Large company stocks 43.57% 21.28% 0.0375695111
1959 Large company stocks 12.01% 20.70% 0.0383531556
1960 Large company stocks 0.47% 17.74% 0.0409568529
1961 Large company stocks 26.84% 18.05% 0.0414597979
1962 Large company stocks -8.75% 15.33% 0.0486187268
1963 Large company stocks 22.70% 17.71% 0.0456044267
1964 Large company stocks 16.43% 14.13% 0.0309582489
1965 Large company stocks 12.38% 12.21% 0.0271820782
1966 Large company stocks -10.06% 10.51% 0.0320590677
1967 Large company stocks 23.98% 13.96% 0.027850209
1968 Large company stocks 11.03% 10.70% 0.0170252357
1969 Large company stocks -8.43% 8.66% 0.0206095032
1970 Large company stocks 3.94% 9.01% 0.0200984493
1971 Large company stocks 14.30% 7.75% 0.016701224
1972 Large company stocks 18.99% 10.53% 0.0142237338
1973 Large company stocks -14.69% 6.79% 0.0180886134
1974 Large company stocks -26.47% 2.50% 0.0272997201
1975 Large company stocks 37.23% 4.98% 0.0389325573
1976 Large company stocks 23.93% 8.38% 0.0391240343
1977 Large company stocks -7.16% 5.27% 0.0380265223
1978 Large company stocks 6.57% 4.82% 0.037654261
1979 Large company stocks 18.61% 7.53% 0.0370034983
1980 Large company stocks 32.50% 10.38% 0.0428849543
1981 Large company stocks -4.92% 8.46% 0.0449051899
1982 Large company stocks 21.55% 8.72% 0.0455698228
1983 Large company stocks 22.56% 12.44% 0.0400713089
1984 Large company stocks 6.27% 15.71% 0.0224811982
1985 Large company stocks 31.73% 15.16% 0.0201539649
1986 Large company stocks 18.67% 14.64% 0.0194059929
1987 Large company stocks 5.25% 15.88% 0.0149346699
1988 Large company stocks 16.61% 16.88% 0.0138657446
1989 Large company stocks 31.69% 18.19% 0.0160785899
1990 Large company stocks -3.10% 14.63% 0.017432181
1991 Large company stocks 30.46% 18.17% 0.0145781943
1992 Large company stocks 7.62% 16.78% 0.015472036
1993 Large company stocks 10.08% 15.53% 0.015425444
1994 Large company stocks 1.32% 15.03% 0.016688849
1995 Large company stocks 37.58% 15.62% 0.019201684
1996 Large company stocks 22.96% 16.05% 0.0196766823
1997 Large company stocks 33.36% 18.86% 0.0208338773
1998 Large company stocks 28.58% 20.06% 0.0216687183
1999 Large company stocks 21.04% 18.99% 0.0200493267
2000 Large company stocks -9.10% 18.39% 0.02335466
2001 Large company stocks -11.89% 14.16% 0.0299306739
2002 Large company stocks -22.10% 11.18% 0.0430794623
2003 Large company stocks 28.89% 13.06% 0.0461565693
2004 Large company stocks 10.88% 14.02% 0.0445755578
2005 Large company stocks 4.91% 10.75% 0.0381442868
2006 Large company stocks 15.79% 10.04% 0.0367133938
2007 Large company stocks 5.49% 7.25% 0.0300354321
2008 Large company stocks -37.00% 0.69% 0.0419564188
2009 Large company stocks 26.46% 1.23% 0.0447011068
2010 Large company stocks 15.06% 3.65% 0.0449904899
2011 Large company stocks 2.11% 5.05% 0.0421161343
2012 Large company stocks 16.00% 8.86% 0.033646081
2013 Large company stocks 32.39% 9.21% 0.0353265477
Standard deviation

Find 10-year rolling average return, variance, and standard deviation for large company stocks

0.3343942244
0.3415501421
0.3612564772
0.3470353546
0.3447945748
0.3335681679
0.2937600389
0.2883214919
0.2565694493
0.254629583
0.2402329862
0.2336887997
0.1821750672
0.1668875882
0.1659421171
0.1602615463
0.1336326557
0.1332045895
0.1413328023
0.185015363
0.180482829
0.1615955998
0.1826026153
0.1938285611
0.1958396169
0.2023779951
0.2036167918
0.220496546
0.2135519297
0.1759495635
0.1648698827
0.1790504612
0.1668838189
0.1304807866
0.1435601032
0.1417689999
0.1292332155
0.119263296
0.134493916
0.1652262694
0.1973133481
0.1977979634
0.1950039034
0.1940470587
0.1923629339
0.207086828
0.211908447
0.2134708945
0.2001781928
0.1499373143
0.1419646607
0.1393053943
0.122207487
0.1177528962
0.1268013797
0.132030985
0.1207401935
0.1243866392
0.1241992109
0.1291853281
0.1385701411
0.1402735981
0.1443394518
0.1472029834
0.1415956449
0.1528223151
0.1730048378
0.2075559258
0.2148408
0.2111292443
0.195305624
0.1916073949
0.1733073343
0.2048326604
0.2114263625
0.2121096176
0.2052221585
 0.183428681
0.1879535785
tion for large company stocks (5 points)
Find the expected return and the variance based on the following expectations (5 points)

Return Deviation
State of Probability of Return if State from Expected
Economy State Occurs Return
Boom 0.2 0.27 0.134
Normal 0.7 0.13 -0.006
Recession 0.1 -0.09 -0.226
Expected return = 0.136
Squared Return
Deviation from
Expected Return
0.017956
0.000036
0.051076
Variance = 0.008724
DATA
Price Holding Period Return
Date S&P 500 Amazon.com S&P 500 Amazon.com
1/4/2010 1073.87 125.41
2/1/2010 1104.49 118.4 0.028514 -0.055897 1 Find the monthly hold
3/1/2010 1169.43 135.77 0.058796 0.146706
4/1/2010 1186.69 137.1 0.014759 0.009796
5/3/2010 1089.41 125.46 -0.081976 -0.084902 2 Estimate the beta of Am
6/1/2010 1030.71 109.26 -0.053882 -0.129125 0.979622
7/1/2010 1101.6 117.89 0.068778 0.078986
8/2/2010 1049.33 124.83 -0.047449 0.058868 3 Draw Amazon's charac
9/1/2010 1141.2 157.06 0.087551 0.258191
10/1/2010 1183.26 165.23 0.036856 0.052018
11/1/2010 1180.55 175.4 -0.00229 0.061551 A
12/1/2010 1257.64 180 0.0653 0.026226
1/3/2011 1286.12 169.64 0.022646 -0.057556
2/1/2011 1327.22 173.29 0.031957 0.021516
3/1/2011 1325.83 180.13 -0.001047 0.039471
4/1/2011 1363.61 195.81 0.028495 0.087048
5/2/2011 1345.2 196.69 -0.013501 0.004494 f(x) = 0.9796216
6/1/2011 1320.64 204.49 -0.018258 0.039656
7/1/2011 1292.28 222.52 -0.021474 0.088171
8/1/2011 1218.89 215.23 -0.056791 -0.032761 -0.1 -0.05
9/1/2011 1131.42 216.23 -0.071762 0.004646
10/3/2011 1253.3 213.51 0.107723 -0.012579
11/1/2011 1246.96 192.29 -0.005059 -0.099386
12/1/2011 1257.6 173.1 0.008533 -0.099797
1/3/2012 1312.41 194.44 0.043583 0.123281
2/1/2012 1365.68 179.69 0.040589 -0.075859
3/1/2012 1408.47 202.51 0.031332 0.126996
4/2/2012 1397.91 231.9 -0.007497 0.145129
5/1/2012 1310.33 212.91 -0.062651 -0.081889
6/1/2012 1362.16 228.35 0.039555 0.072519
7/2/2012 1379.32 233.3 0.012598 0.021677
8/1/2012 1406.58 248.27 0.019763 0.064166
9/4/2012 1440.67 254.32 0.024236 0.024369
10/1/2012 1412.16 232.89 -0.019789 -0.084264
11/1/2012 1416.18 252.05 0.002847 0.082271
12/3/2012 1426.19 250.87 0.007068 -0.004682
1/2/2013 1498.11 265.5 0.050428 0.058317
2/1/2013 1514.68 264.27 0.011061 -0.004633
3/1/2013 1569.19 266.49 0.035988 0.0084
4/1/2013 1597.57 253.81 0.018086 -0.047582
 5/1/2013 1630.74 269.2 0.020763 0.060636
6/3/2013 1606.28 277.69 -0.014999 0.031538
7/1/2013 1685.73 301.22 0.049462 0.084735
8/1/2013 1632.97 280.98 -0.031298 -0.067193
9/3/2013 1681.55 312.64 0.029749 0.112677
10/1/2013 1756.54 364.03 0.044596 0.164374
11/1/2013 1805.81 393.62 0.028049 0.081285
12/2/2013 1848.36 398.79 0.023563 0.013134
1/2/2014 1782.59 358.69 -0.035583 -0.100554
2/3/2014 1859.45 362.1 0.043117 0.009507
3/3/2014 1872.34 336.37 0.006932 -0.071058
4/1/2014 1883.95 304.13 0.006201 -0.095847
5/1/2014 1923.57 312.55 0.02103 0.027686
6/2/2014 1960.23 324.78 0.019058 0.03913
7/1/2014 1930.67 312.99 -0.01508 -0.036301
8/1/2014 2003.37 339.04 0.037655 0.083229
9/2/2014 1972.29 322.44 -0.015514 -0.048962
10/1/2014 2018.05 305.46 0.023201 -0.052661
11/3/2014 2067.56 338.64 0.024534 0.108623
12/1/2014 2058.9 310.35 -0.004189 -0.08354
1/2/2015 1994.99 354.53 -0.031041 0.142355
Find the monthly holding period return for S&P500 and Amazon (5 points)

Estimate the beta of Amazon (5 points)

Draw Amazon's characteristics line (10 points)

Amazon Characteristics Line

0.3

0.25

0.2

0.15

0.1
f(x) = 0.9796216328x + 0.0097676451
0.05

0
-0.1 -0.05 0 0.05 0.1 0.15
-0.05

-0.1

-0.15