Q1 Import stock prices of NASDAQ Compsite Index, Microsoft and Walmart for the last 30 years.

## # A tibble: 22,677 x 8
## # Groups:   symbol [3]
##    symbol date        open  high   low close    volume adjusted
##    <chr>  <date>     <dbl> <dbl> <dbl> <dbl>     <dbl>    <dbl>
##  1 ^IXIC  1990-04-23  423.  425.  418.  420. 125990000     420.
##  2 ^IXIC  1990-04-24  422.  422.  419.  419. 126790000     419.
##  3 ^IXIC  1990-04-25  420   421.  419.  421. 121710000     421.
##  4 ^IXIC  1990-04-26  422.  422   419.  421. 115930000     421.
##  5 ^IXIC  1990-04-27  421.  421.  418.  418  116010000     418 
##  6 ^IXIC  1990-04-30  418.  420.  417   420. 105790000     420.
##  7 ^IXIC  1990-05-01  422   422.  421.  422. 124130000     422.
##  8 ^IXIC  1990-05-02  423.  424.  422.  424. 143260000     424.
##  9 ^IXIC  1990-05-03  425   427.  424.  425. 160850000     425.
## 10 ^IXIC  1990-05-04  427.  429.  426.  429. 136810000     429.
## # … with 22,667 more rows

Q2 Calculate yearly returns.

## # A tibble: 93 x 3
## # Groups:   symbol [3]
##    symbol date       yearly.returns
##    <chr>  <date>              <dbl>
##  1 ^IXIC  1990-12-31        -0.110 
##  2 ^IXIC  1991-12-31         0.569 
##  3 ^IXIC  1992-12-31         0.155 
##  4 ^IXIC  1993-12-31         0.147 
##  5 ^IXIC  1994-12-30        -0.0320
##  6 ^IXIC  1995-12-29         0.399 
##  7 ^IXIC  1996-12-31         0.227 
##  8 ^IXIC  1997-12-31         0.216 
##  9 ^IXIC  1998-12-31         0.396 
## 10 ^IXIC  1999-12-31         0.856 
## # … with 83 more rows

Q3 Which of the three stocks has the highest expected yearly return?

## # A tibble: 3 x 2
##   symbol returns_avg
##   <chr>        <dbl>
## 1 ^IXIC        0.137
## 2 MSFT         0.275
## 3 WMT          0.160

The stock that I think is going to have the highest return is Microsoft with .275.

Q4 Calculate standard deviation of the yearly returns. Which of the three stocks is the riskiest in terms of standard deviation?

## # A tibble: 3 x 2
## # Groups:   symbol [3]
##   symbol  sd.1
##   <chr>  <dbl>
## 1 ^IXIC  0.278
## 2 MSFT   0.402
## 3 WMT    0.327

The highest risk when talking about standard deviation is MSFT. It has the highest standard deviation at .402.

Q5 Is the standard deviation appropriate measure of risk for the three stocks? Calculate skewness and kurtosis, and discuss them in your answer.

## # A tibble: 3 x 2
## # Groups:   symbol [3]
##   symbol skewness.1
##   <chr>       <dbl>
## 1 ^IXIC       0.179
## 2 MSFT        0.275
## 3 WMT         1.42
## # A tibble: 3 x 2
## # Groups:   symbol [3]
##   symbol kurtosis.1
##   <chr>       <dbl>
## 1 ^IXIC       0.302
## 2 MSFT        0.431
## 3 WMT         1.52

Using standard deviation is not always affective. For example, Walmart’s skewness and kurtosis was way higher than the other stocks, however in question 4 it happened to not be the highest standard deviation. Which means you should look at different things besides just standard diviation.

Q6 Which of the three stocks poses greater downside risk? Calculate HistoricalES(95%), HistoricalVaR(95%), and SemiDeviation, and discuss them in your answer.

##                                           [,1]      [,2]      [,3]     
## symbol                                    "^IXIC"   "MSFT"    "WMT"    
## DownsideDeviation(0%)                     "0.1245"  "0.1448"  "0.0829" 
## DownsideDeviation(MAR=0.833333333333333%) "0.1279"  "0.1475"  "0.0866" 
## DownsideDeviation(Rf=0%)                  "0.1245"  "0.1448"  "0.0829" 
## GainDeviation                             "0.2050"  "0.3226"  "0.3151" 
## HistoricalES(95%)                         "-0.3991" "-0.5362" "-0.2471"
## HistoricalVaR(95%)                        "-0.3541" "-0.3317" "-0.2197"
## LossDeviation                             "0.1598"  "0.2388"  "0.0885" 
## MaximumDrawdown                           "0.6718"  "0.6285"  "0.3206" 
## ModifiedES(95%)                           "-0.4069" "-0.4899" "-0.5204"
## ModifiedVaR(95%)                          "-0.2976" "-0.3414" "-0.2176"
## SemiDeviation                             "0.1892"  "0.2659"  "0.1707"

Microsoft’s downside risk is greater. It has more volatile monthly returns below the mean than Walmart and NASDAQ, the largest loss one would expect with 95% confidence is larger for NASDAQ and Walmart, and the average of the 5% most negative monthly returns is larger for NASDAQ and Walmart.

Q7 Which of the three stocks would you choose? Calculate the Sharpe ratios with an annualized risk-free rate of 2% and a default confidence interval of 0.95.

## # A tibble: 3 x 4
## # Groups:   symbol [3]
##   symbol `ESSharpe(Rf=2%,p=5%)` `StdDevSharpe(Rf=2%,p=5%… `VaRSharpe(Rf=2%,p=5%…
##   <chr>                   <dbl>                     <dbl>                  <dbl>
## 1 ^IXIC                   0.286                     0.419                  0.392
## 2 MSFT                    0.520                     0.633                  0.746
## 3 WMT                     0.269                     0.428                  0.644

Its all depends on what angle you are investing at. If you are in it for the long run, you possibly want more risk. Maybe if you are investing short term, you cant risk as much. If I were investing long term I would choose microsoft.

Q7.a Repeat Q7 but at a confidence interval of 0.99. Does it change your answer in Q7?

## # A tibble: 3 x 4
## # Groups:   symbol [3]
##   symbol `ESSharpe(Rf=2%,p=1%)` `StdDevSharpe(Rf=2%,p=1%… `VaRSharpe(Rf=2%,p=1%…
##   <chr>                   <dbl>                     <dbl>                  <dbl>
## 1 ^IXIC                   0.205                     0.419                  0.243
## 2 MSFT                    0.364                     0.633                  0.428
## 3 WMT                     0.140                     0.428                  1.13

The numbers for the ratios are completely different now that there is a .01 confidence interval. Some of microsofts ratios went up because of standard deviation and some went down because of ES and Var.It all depends on how much time you have want your money sitting around. I could look at walmart now with the .01. But i’d more than likly stay with microsoft.

Q8 Hide the messages and the code, but display results of the code from the webpage.

Hint: Use message, echo and results in the chunk options. Refer to the RMarkdown Reference Guide.

Q9 Display the title and your name correctly at the top of the webpage.

Q10 Use the correct slug.