Financial Portfolio Selection using Multi-factor Capital Asset Pricing Model and Importing Options Data
Stata Journal, Vol. 13, No. 3, pp. 603-617, 2013
13 Pages Posted: 31 Aug 2013 Last revised: 28 Sep 2013
Date Written: February 24, 2013
Abstract
Diversification and portfolio selection is an integral part of finance teaching. In this study, multi-factor Capital Asset Pricing Model (CAPM) is estimated for components of Dow Jones Composite Index using data from Yahoo! Finance. Along with CAPM's Beta, other statistics are calculated that are common decision criteria for portfolio selection such as historic standard deviation (total risk), total return, average daily return, Sharpe and Treynor measures. Two new commands are introduced, components and portfolio, that automate the entire process. A third new command, fetchyahoooptions, is provided to download and parse equity options data from Yahoo! Finance web pages and, optionally, to calculate the implied volatilities for the downloaded options.
Keywords: Stata, finance, financial data, multi-factor CAPM, Beta, diversification, portfolio selection, Sharpe, Treynor, options, implied volatility
Suggested Citation: Suggested Citation
Register to save articles to
your library
Recommended Papers
-
A Five-Factor Asset Pricing Model
By Eugene F. Fama and Kenneth R. French
-
Long-Term Portfolio Management with a Structural Macroeconomic Model
By Ludovic Calès, Eric Jondeau, ...
-
Introducing Expected Returns into Risk Parity Portfolios: A New Framework for Asset Allocation
-
Determinants of Levered Portfolio Performance
By Robert M. Anderson, Stephen Bianchi, ...
-
By Andrew Ang
-
Generalized Risk-Based Investing
By Emmanuel Jurczenko, Thierry Michel, ...
-
By Betul Dicle, John Levendis, ...