Index Model

1.) Visit this link to download market return data (using the SPY index). Choose "Frequency: Monthly" and Time Period: "5Y".
Link: https://finance.yahoo.com/quote/SPY/history?p=SPY
2.) Paste the Dates and Adj Close values from step 1 into Columns 1 and 2 below.
3.) Type in a stock ticker, and visit the link that generates below.
Ticker: WMT Link: https://finance.yahoo.com/quote/WMT/history?p=WMT
4.) Download the historical data, choosing "Frequency: Monthly" and Time Period: "5Y"
5.) Paste the Adj Close values from step 4 into Column 3.
6.) Visit this link to obtain monthly risk-free rates (in the RF column). Paste these values in Column 4
Link: https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/ftp/F-F_Research_Data_Factors_CSV.zip
7.) The excess returns of the market and stock will generate in columns 5 and 6 and the scatter plot will update.
8.) Verify your beta by comparing to that listed on Yahoo! Finance's website for your stock.

(1) (2) (3) (4) (5) (6) Stock's Beta 0.49

Mkt Adj. Close Market Excess Stock Excess Slope: the systematic risk, sensitivity to market.
Date WMT Adj. Close Monthly RF Rate
(SPY) Return* Return Stock's Alpha 0.01
9/1/2016 197.13 64.97 0.02 Intercept: E(r) beyond that consistent with its beta and market excess return.
10/1/2016 194.69 63.07 0.02 -1.3% -2.9% R-squared 0.18
11/1/2016 201.87 63.44 0.02 3.7% 0.6% Proportion of total variance explained by the market.
### 12/1/2016 204.75 62.26 0.01 1.4% -1.9%
### 1/1/2017 209.64 60.55 0.03 2.4% -2.8%
2/1/2017 217.88 64.35 0.04 3.9% 6.2% Scatter Plot of Asset and Market Excess Returns
3/1/2017 217.21 65.39 0.04 -0.3% 1.6% 15.0%
4/1/2017 220.32 68.71 0.03 1.4% 5.0%
5/1/2017 223.43 71.83 0.05 1.4% 4.5% 10.0%
6/1/2017 223.76 69.63 0.06 0.1% -3.1%
7/1/2017 229.47 73.59 0.06 2.5% 5.6% f(x)0.4860580542 0.0073659
= 0.486058054218999 x + 0.00736589895019014
5.0%
8/1/2017 230.14 71.83 0.07 0.2% -2.5% R² =0.1405530165 0.0065811
0.178602195945787
3 9/1/2017 233.62 72.34 0.09 1.4% 0.6% 0.1786021959 0.0475039
0.0%
10/1/2017 240.31 80.83 0.09 2.8% 11.6% -15.0% 11.959029752
-10.0% -5.0% 55
0.0% 5.0% 10.0% 15.0%
11/1/2017 247.66 90.02 0.09 3.0% 11.3% 0.0269870315 0.1241143
12/1/2017 249.39 91.42 0.08 0.6% 1.5% -5.0%
1/1/2018 264.79 99.21 0.09 6.1% 8.4%

Stock Excess Returns

2/1/2018 255.16 83.77 0.11 -3.7% -15.7% -10.0%
3/1/2018 247.18 82.80 0.11 -3.2% -1.3%
4/1/2018 249.45 82.82 0.12 0.8% -0.1% -15.0%
5/1/2018 255.51 77.28 0.14 2.3% -6.8%
6/1/2018 255.84 80.69 0.14 0.0% 4.3% -20.0%
7/1/2018 266.50 84.07 0.14 4.0% 4.0%
8/1/2018 275.01 90.31 0.16 3.0% 7.3% Market Excess Returns
9/1/2018 275.40 88.99 0.16 0.0% -1.6%
10/1/2018 257.53 95.03 0.15 -6.6% 6.6%
11/1/2018 262.31 92.53 0.19 1.7% -2.8%
12/1/2018 237.82 88.27 0.18 -9.5% -4.8%
1/1/2019 258.36 91.31 0.19 8.4% 3.2%
2/1/2019 266.74 94.32 0.21 3.0% 3.1%
3/1/2019 270.38 92.93 0.18 1.2% -1.7%
4/1/2019 282.66 98.51 0.19 4.4% 5.8%
5/1/2019 264.63 97.17 0.21 -6.6% -1.6%
6/1/2019 281.68 106.40 0.21 6.2% 9.3%
7/1/2019 287.33 106.30 0.18 1.8% -0.3%
8/1/2019 282.52 110.03 0.19 -1.9% 3.3%
9/1/2019 286.69 114.85 0.16 1.3% 4.2%
10/1/2019 294.38 113.48 0.18 2.5% -1.4%
11/1/2019 305.04 115.25 0.15 3.5% 1.4%
12/1/2019 312.37 115.01 0.12 2.3% -0.3%
1/1/2020 313.77 111.29 0.14 0.3% -3.4%
2/1/2020 288.93 104.67 0.13 -8.0% -6.1%
3/1/2020 251.38 110.45 0.12 -13.1% 5.4%
4/1/2020 284.96 118.68 0.12 13.2% 7.3%
5/1/2020 298.54 121.13 0 4.8% 2.1%
6/1/2020 302.50 117.47 0.01 1.3% -3.0%
7/1/2020 321.73 126.90 0.01 6.3% 8.0%
8/1/2020 344.18 136.17 0.01 7.0% 7.3%
9/1/2020 329.98 137.77 0.01 -4.1% 1.2%
10/1/2020 323.04 136.63 0.01 -2.1% -0.8%
11/1/2020 358.17 150.45 0.01 10.9% 10.1%
12/1/2020 369.87 141.95 0.01 3.3% -5.7%
1/1/2021 367.66 138.85 0.01 -0.6% -2.2%
2/1/2021 377.88 128.40 0 2.8% -7.5%
3/1/2021 393.75 134.24 0 4.2% 4.5%
4/1/2021 415.94 138.85 0 5.6% 3.4%
5/1/2021 418.67 140.96 0 0.7% 1.5%
6/1/2021 426.66 140.50 0 1.9% -0.3%
*You could simply use the MKT-RF column of returns instead of the SPY from the Ken French data.

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© Joseph Farizo