Identify a sample of food companies. For example, you could try Campbell Soup (C
ID: 2789230 • Letter: I
Question
Identify a sample of food companies. For example, you could try Campbell Soup (CPB), General Mills (GIS), Kellogg (K), Kraft Foods (KFT), and Sara Lee (SLE). a. Estimate beta and R2 for each company, using five years of monthly returns and Excel functions SLOPE and RSQ. b. Average the returns for each month to give the return on an equally weighted portfolio of the stocks. Then calculate the industry beta using these portfolio returns. How does the R2 of this portfolio compare with the average R2 of the individual stocks? c. Use the CAPM to calculate an average cost of equity (r equity) for the food industry. Use current interest rates—take a look at the end of Section 9–2—and a reasonable estimate of the market risk premium. Please use the data from Nov 2013- Nov 2017. You can obtain stock pricing and values from finance.yahoo.com or any other credible stock pricing site.
Explanation / Answer
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Value of the Beta = 0.45
Co efficient of correlation = 0.12
KFT S&P 500 adj close KFT Adj Returns S$P Adj Returns Nov-13 39.05 1500.75 -0.28% 0.76% Dec-13 39.15914 1506.445 -0.28% 0.75903491400% Jan-14 39.26859 1512.162 -0.28% 0.75906982961% Feb-14 39.37835 1517.901 -0.28% 0.75910474682% Mar-14 39.48841 1523.661 -0.29% 0.75913966564% Apr-14 39.59878 1529.444 -0.29% 0.75917458606% May-14 39.70946 1535.248 -0.30% 0.75920950809% Jun-14 39.82045 1541.074 -0.30% 0.75924443173% Jul-14 39.93175 1546.923 -0.39% 0.75927935697% Aug-14 40.04336 1552.793 -0.50% 0.75931428382% Sep-14 40.15528 1558.686 -0.65% 0.75934921228% Oct-14 40.26751 1564.601 -0.28% 0.75938414234% Nov-14 40.38006 1570.539 -0.36% 0.75941907402% Dec-14 40.49292 1576.499 -0.04% 0.75945400729% Jan-15 40.6061 1582.482 -0.05% 0.75948894218% Feb-15 40.71959 1588.487 -0.05% 0.75952387867% Mar-15 40.8334 1594.516 -0.05% 0.75955881677% Apr-15 40.94753 1600.567 -0.05% -0.37806524241% May-15 41.06198 1606.641 -0.04% -0.37808263341% Jun-15 41.17675 1612.738 -0.04% -0.37810002521% Jul-15 41.29184 1618.859 -0.04% -0.37811741781% Aug-15 41.40725 1625.002 -0.04% -0.37813481121% Sep-15 41.52298 1631.169 -0.04% -0.37815220541% Oct-15 41.63904 1637.359 -0.04% -18.55919069165% Nov-15 41.75542 2010.49 -0.04% -18.56004441442% Dec-15 41.87213 2018.12 -0.04% -18.56089817647% Jan-16 41.98916 2025.779 -0.04% -18.56175197778% Feb-16 42.10652 2033.466 -0.04% -18.56260581837% Mar-16 42.22421 2041.183 -0.04% -18.56345969824% Apr-16 42.34222 2048.93 -0.04% -18.56431361739% May-16 42.46057 2056.705 -0.04% -18.56516757581% Jun-16 42.57925 2064.511 -0.04% -18.56602157352% Jul-16 42.69826 2072.345 -0.04% -18.56687561052% Aug-16 42.8176 2080.21 -0.04% -18.56772968679% Sep-16 42.93727 2088.104 -0.04% -18.56858380236% Oct-16 43.05728 2096.029 -0.04% -18.56943795721% Nov-16 43.17763 2103.983 -0.04% -18.57029215136% Dec-16 43.29831 2111.968 -0.04% -18.57114638480% Jan-17 43.41933 2119.983 -0.04% -18.57200065753% Feb-17 43.54069 2128.028 -0.04% -18.57285496956% Mar-17 43.66238 2136.104 -0.04% -18.57370932089% Apr-17 43.78442 2144.21 -0.04% -18.57456371152% May-17 43.9068 2152.348 -0.04% -18.57541814145% Jun-17 44.02952 2160.516 -0.04% -18.57627261069% Jul-17 44.15258 2168.715 -0.04% -18.57712711923% Aug-17 44.27599 2176.945 -0.04% -18.57798166707% Sep-17 44.39974 2185.207 -0.04% -18.57883625423% Oct-17 44.52383 2193.5 -0.04% -0.37806524241% Nov-17 44.64828 2201.824 -0.04% -0.37808263341%Related Questions
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