Essay About Weekly Returns And Equity Beta

Airthread Case Analysis
FIN 286                        ALESSANDRO PREVITEROHomework 2Calculating the Cost of CapitalDue Wed Jan 27th 2015___________________________________________________________________________The next step to value the company you chose in HW#1 is to compute the equity beta, and the equity cost of capital. As you learnt in class, there are three ways to compute the equity beta: (1) running a regression using a single factor model; (2) use comparable companies; (3) running a regression using a multi-factor model. In this homework assignment, you will have to use all three methods, and compare the results. Regression AnalysisYou will calculate the cost of equity capital (re) for your company running a regression analysis following the CAPM. You plan to follow a relatively standard procedure. Specifically, you plan to:Pull a reasonable number of years of weekly price data from Yahoo! Finance (use the “Adjusted Close” price which captures dividends and any stock splits. Make sure that you state in the write-up how long of a time series you used, and why;  [select “Historical Prices”, select the appropriate start and end dates, and select “Weekly prices”; when you get the price series, download the data as a spreadsheet;]Calculate weekly returns from your price data using the “Adjusted Close” price. [return for period t is defined as the ratio (pt-pt-1)/pt-1, where pt is the price of the stock at time t]Repeat a) and b) for the S&P 500 Composite Index (use the symbol “^GSPC” in Yahoo! Finance.);Calculate the equity beta using the stock’s return data and corresponding return data on the S&P 500 Index [using Excel, go to “data” menu, choose “data analysis” (this is an add-in, so you may have to install it