Measuring Portfolio Risk and Performance

Project 1: Measuring Portfolio Risk and Performance
Identify twelve (or more if you want the project to be more realistic) publicly-traded firms that you are familiar with. Obtain the monthly
prices for these firms and compute the following risk and performance measures for each of those firms.
1. Mean monthly arithmetic return 2. Mean monthly geometric return 3. Standard deviation of return
4. Beta relative to the market
5. Idiosyncratic volatility using CAPM
6. Sharpe ratio
7. Jensen’s alpha (same as CAPM alpha)
8. Betas relative to all the factors in the 4-factor model 9. Four-factor alpha
Next, using your risk and performance measures, develop a trading strategy, i.e., use past data to rank firms such that higher ranked
firms are likely to perform well in the future while lower ranked firms would perform poorly. Create a zero-cost portfolio where you Long
firms in the top one third and hold a Short position in the firms in the bottom third. Compute all the risk and performance measures for
this new portfolio as well as the Long and the Short portfolios individually.
The data for the project can be obtained from:
• Yahoo! Finance: http://finance.yahoo.com (http://finance.yahoo.com), or
• Ken French’s data web site available at http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data
(http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data) library.html. (http://library.html.)
Additional instructions are available in the following video: https://www.dropbox.com/s/bpls6gh2o9bugi4/Proj1Desc
(https://www.dropbox.com/s/bpls6gh2o9bugi4/Proj1Desc) Carina.mp4?dl=0. (http://Carina.mp4?dl=0.)
Please submit a short report.