Obtain historical prices (adjusted close) of two stocks listed on the Hong Kong stock exchange. Use the Hang Seng Index as the market benchmark and the US 13-Week (i.e. 3-month) Treasury bill yield as the risk-free rate in your analysis. You may use other yields on government securities as risk-free rates if you think they are appropriate. Instructions and Deliverables 1. Obtain the month-end prices (or values) of the stocks, the index, and the T-bill rate over a common 10-year period and calculate the monthly holding-period returns. That is, for the stocks, the index and the T-bill rate, you need to obtain returns over 120 consecutive months. Explain your choice of the stocks and give a brief description of the stocks’ issuing companies. 2. Calculate the summary statistics for the stocks and the index. That is, calculate the mean return, standard deviation, skewness, kurtosis, maximum return, and minimum return for the stocks and the index. Comment on these statistics. 3. Calculate the correlation between each stock and the index and provide some general comments. 4. Calculate 5 different performance measures (Sharpe Measure, M square, Treynor’s measure, T square, and Appraisal Ratio) for each stock and the index. Make comments on their performances. Be sure to compare the two stocks and the index in relation to the performance measures. 5. Why do you think it is appropriate to use the T-bill rate as the proxy for the risk-free rate even though you are asked to study a stock listed in Hong Kong?
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