Equally important to understanding the various calculations inherent in securities analysis is developing a facility for applying Microsoft Excel to those calculations. Securities analysis quickly becomes too vast and complex to properly complete without the calculating power of applicable software packages, the most ubiquitous of which is Microsoft Excel.
For Problems 20–22, download the spreadsheet containing the data used to prepare Table 5.3 Download Table 5.3, “Rates of return, 1927–2016,” included with the question.
Calculate the means and standard deviations of small stock returns as Table 5.3
of the text provides for large stocks.(LO 5-2)
Have small stocks provided better reward-to-volatility (Sharpe) ratios than large stocks?
Do small stocks show a similar higher standard deviation in the earliest subperiod as Table 5.5 documents for large stocks?
Convert the nominal returns on large stocks to real rates. Reproduce Table 5.3 using real rates instead of excess returns. Compare the results to those of Table 5.3. Are real or nominal returns more volatile in this sample period?(LO 5-1)
Repeat the previous problem for small stocks and compare the results for real versus nominal returns.(LO 5-1)
Compose your work in a .doc or .docx file type using a word processor (such as Microsoft Word, etc.). Check your work and correct any spelling or grammatical errors.
