Estimating the expected return and standard deviation of Facebook stock
Compute the Facebook’s expected daily return and the standard deviation using its realized return from Jan 1, 2015 to June 30,2019. (Please watch the Class video for page 21 of CH5 for more instructions).
a) Collect historical price data.
You will begin by collecting historical stock price data for the company. Historical stock prices are available on the internet through at the http://finance.yahoo.com website. At this website you will put the ticker symbol for your company in the symbol box and press “go”. At this point you will see a page that has financial information about your company. On the left-hand side of the screen there will be a series of option which you can choose to get more information about your company. At this point you want to look under “quotes” and choose “historical prices”. The ticker of Facebook is FB.
At this point, you will be given some options about the time period and frequency of the data you are collecting. You want dailydata beginning January 1, 2015 and ending June 30, 2019. Once you have specified this time period, push the “get prices” button. After the historical price information appears, you will see an option “download to spreadsheet” at the bottom of the historical price table. Select this option to bring the information into an excel file.
b) Calculate daily returns.
The formula to compute daily returns is as followngs:
(P2-P1)/P1 =
c) Estimate the expected rate of return and Standard deviation.
The excel function for the expected rate of return is “=average ()”
The excel function for the standard deviation is “=stdev()”