Blackrock Essays

1285 Words Nov 23rd, 2013 6 Pages
Statistics Project and Paper | BlackRock Inc. (BLK) | Rishabh Prabhu
MSF Global CohortFINA 6202: Analysis of Financial Institutions and MarketsSubmission Date: 11/22/2013 |

Statistics Paper: BlackRock Inc. (BLK)
In the following paper, I have analyzed the stock returns for BlackRock Inc. (BLK), for the period from May, 1999 to September, 2013. Throughout the paper, RBLK-RFR stands for the excess monthly return for BlackRock stock, RM-RFR stands for the market excess return, SMB stands for the return on Small Minus Big stocks and HML stands for the return on High Minus Low stocks. 1) The mean, standard deviation, skewness, kurtosis and excess kurtosis for the excess return variables are: Excess Variables | Mean | Standard
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RM-RFR is positively correlated to SMB and HML; while SMB and HML are negatively correlated. 3) From the regression performed (Tables 1A, 1B and 1C in Appendix), we can see that α for the CAPM Model is 1.8448 while the β is 0.8623.Thus, the CAPM model takes the form: (RBLK-RFR) = 1.8448 + 0.8623(RM-RFR).α is the intercept of the Characteristic line and β is the slope of the line. The positive α of 1.8448 means that the return on BlackRock has outperformed the market return by 1.8448%. On the other hand, a β of 0.8623 signifies that BlackRock is a slightly defensive investment, with volatility of returns being slightly less than the market return volatility. A 1% increase in the excess market return would cause a 0.8623% increase in the excess monthly return for BlackRock.
The R Square for the regression is 0.1754, which means that 17.54% of the risk associated with holding the BlackRock stock is systematic. 82.46% of the total risk is company specific and can be diversified away. On the other hand, the Adjusted R Square for the CAPM Model regression is seen to be 0.1705. This means that β can explain the CAPM model with an accuracy of 17.05%. 4) The regression results for the Fama-French Three Factor Model have been tabulated in Tables 2A, 2B and 2C of the Appendix.From the table, we can see that α for the model is 1.7264, β1 is 0.8029, β2 is 0.1749 and β3 is 0.1711. Thus, our Three Factor Model takes the form: (RBLK-RFR) = 1.7264 +

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