FE5206 Assignment 1, Due: 6 pm, Saturday, 9 September 2023
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1. Obtain the number of stocks in each of the GICS industries (the GICS industry is defined using the first 6 digits of the GICS code) for the S&P 500 universe at the beginning of 2018 and 2023 respectively. Calculate the total market cap of each industry. What are the top three industries in terms of total market cap at the beginning of 2018 and at the beginning of 2023? You only need to give the first 6 digits of the GICS as the label of the industry.
2. List the stocks in the 2023 universe that are also in the industry HPQ belongs to.
3. Calculate the returns of the stocks in the list from Question 2 (the stocks that are in the 2023 universe and in the industry that HPQ belongs to) for the past five years (return time series, from 7/2018 to 6/2023). Use the adjusted prices to calculate the returns (you might
use log-return, 𝑟𝑟 (𝑡𝑡) = ln ( 𝑃𝑃 (𝑡𝑡) )). Calculate the industry return, by
time-series regression 𝑟𝑟=𝛼𝛼+𝛽𝛽𝑟𝑟 +𝜖𝜖,
𝑃𝑃𝑖𝑖(𝑡𝑡−1) 𝐼𝐼
simply average over all the stock returns in the industry, 𝑟𝑟𝐼𝐼(𝑡𝑡) =
𝑛𝑛1 ∑𝑛𝑛𝑖𝑖=1 𝑟𝑟𝑖𝑖(𝑡𝑡), where n is the number of stocks in that industry. Do the
where r is the return of HPQ.
Obtain the values of 𝛼𝛼 and 𝛽𝛽. What’s the 𝑅𝑅2 of the regression?
If the industry return is calculated using the market-cap weighted average (instead of the simple average), what will be your answers? Here, the market-cap weighted average of the industry return is d e f i n e d a s , 𝑛𝑛𝑖𝑖 = 1 𝑖𝑖 𝑖𝑖
𝑟𝑟(𝑡𝑡)=∑ 𝑐𝑐𝑟𝑟(𝑡𝑡),where 𝑐𝑐 isthemarketcapofthestockiatthe 𝐼𝐼 ∑ 𝑛𝑛𝑖𝑖 = 1 𝑐𝑐 𝑖𝑖 𝑖𝑖
beginning of 2023.
You will need to briefly describe how you obtained the answers to the above three questions.
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