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Define Systematic Risk: Task 2

This document contains questions and analysis related to estimating systematic risk and volatility of various stocks using beta coefficients. It finds that WBC, ANZ, and BHP have beta coefficients greater than 1, indicating they are more volatile than the market, while WOW and TLS have betas less than 1, meaning they are less volatile. It also calculates expected returns for each stock using the capital asset pricing model formula and finds the expected returns for WOW and TLS to be higher than WBC, ANZ, and BHP based on their lower betas.

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Anne S. Yen
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39 views3 pages

Define Systematic Risk: Task 2

This document contains questions and analysis related to estimating systematic risk and volatility of various stocks using beta coefficients. It finds that WBC, ANZ, and BHP have beta coefficients greater than 1, indicating they are more volatile than the market, while WOW and TLS have betas less than 1, meaning they are less volatile. It also calculates expected returns for each stock using the capital asset pricing model formula and finds the expected returns for WOW and TLS to be higher than WBC, ANZ, and BHP based on their lower betas.

Uploaded by

Anne S. Yen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Task 2

Question 1
Define systematic risk
WBC
1.0750

coefficient

ANZ
1.0839

BHP
1.3828

WOW
0.5237

TLS
0.3951

Question 2
Interpret the estimated coefficients (for every 10%/1% increase in the market movement,
what happens to the shares?)

Question 3
Volatility of stocks
WBC: Since
ANZ: Since
BHP: Since
WOW: Since
TLS: Since

(1.075) > 1, therefore the stocks are more volatile than the market.
(1.0839) > 1, therefore the stocks are more volatile than the market.
(1.3828) > 1, therefore the stocks are more volatile than the market.
(0.5237) < 1, therefore the stocks are less volatile than the market.
(0.3951) < 1, therefore the stocks are less volatile than the market.

Question 4
Comparison and recommendation for investment strategy in relation to

Question 5

Significance F

WBC
0.0000

ANZ
0.0000

BHP
0.0000

WOW
0.0000

TLS
0.0000

Question 6

R Square

WBC
0.5120

ANZ
0.5054

BHP
0.5530

WOW
0.2354

TLS
0.1286

Interpret

Question 7

Expected
Return
coefficient

ASX
0.0006

WBC
0.0016

ANZ
0.0015

BHP
0.0020

WOW
0.0020

TLS
0.0010

1.0750

1.0839

1.3828

0.5237

0.3951

Assume that the risk free rate is 0.052.


Rf = 5.2% = 0.052/52= 0.001
CAPM formula: E(R) = Rf + [E(Rm)-Rf]
Westpac
0.001 + 1.0750 (0.0006-0.001)
=0.000570
ANZ Bank
0.001 + 1.0839 (0.0006-0.001)
=0.000566

BHP Billiton
0.001 + 1.3828 (0.0006-0.001)
=0.000447

Woolworths
0.001 + 0.5237 (0.0006-0.001)
=0.000791
Telstra
0.001 + 0.3951 (0.0006-0.001)
= 0.000842

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