Computer Assignment

Historical Stock Return Research

Before one invests in the market, a look back at common stock's historical performance may be informative for what one can expect in the future. This assignment takes a look back at the historical performance of 3 different indexes from Jan.1926 to Dec. 2005.

On the Internet, go to Stock Returns. The columnar data is described as follows.

1) The first is the calendar date.

2) The second contains the returns for the value weighted index, (VW is an index that contains all NYSE/AMEX/Nasdaq stocks based on market value).

3) The third is the VW Index.

4) Annual returns based on the VW. Each row is the yearly return for the preceding 12 months.

5) The 5 year annualized average returns.

6) The 10 year annualized average returns.

7) The 15 year annualized average returns.

8) The 20 year annualized average returns.

9) The next section gives yields on the 1-5 year T-Bills and the next section gives 90 day T-bill returns.

Answer the following questions:

Go to the bottom of the stock file to see summary statistics.

1. Using the VW returns, which month had the worst return? Specify month and year. Hint: Find worst month performance at bottom of file in summary statistics then look for it within column.

2. Using the VW returns, which month had the best return? Specify month and year.

3. Starting in January 1926, how much would $100 have accumulated to for each index by 12/31/00?

VW ______________

4. Starting in January 1926, how much would $100 have accumulated to for each index by 12/31/02?

VW ______________

5. Starting in January 1926, how much would $100 have accumulated to for each index by 12/31/05?

VW ______________

6. At the bottom of the file, note the average yearly returns and standard deviations for the two indexes. Fill in the following:

Value weighted = Average _________,Best Return was ___________, Worst return was _____________and Stand. Dev was __________.

7. Look at the annualized returns for the 5, 10, 15, and 20 year holding periods for the Value weighted index.
Fill in the following.

5 year annualized returns:

Best annualized return was ___________%, Worst return was _____________and Stand. Dev was _____________.

10 year annualized returns:

Best annualized return was ___________%, Worst return was _____________and Stand. Dev was _____________.

15 year annualized returns:

Best annualized return was ___________%, Worst return was _____________and Stand. Dev was _____________.

20 year annualized returns:

Best annualized return was ___________%, Worst return was _____________and Stand. Dev was _____________.

8. Based on the above question, has there ever been a 15 year period in the last 80 years where you would have lost money investing in stocks? What about a 20 year period?

9. Finally look at the 90 Day T-bill index. How much would $100 have accumulated to from 1926 to 2005 if you just left it in 90 day T-bills? See 90 day index numbers. This reflects how much $1 would accumulate to.

10. What do your answers from questions 3 and 9 tell you about investing for the long-term?