Question

Given the monthly returns that follow, find the R2, alpha, and beta of the portfolio. Compute the average return differential with and without sign. Do not round intermediate calculations. Round your answers to two decimal places.

MonthPortfolio ReturnS&P 500 Return

January5.1%5.5%

February-2.5-3.2

March-1.6-1.4

April2.72.3

May0.4-0.1

June-1.0-0.4

July0.00.5

August1.21.3

September-0.6-0.2

October-3.4-4.1

November2.21.4

December0.60.5

R2:   

Alpha:   %

Beta:   

Average return difference (with signs):   %

Average return difference (without signs)   %

Answer 1

Month	Portfolio Return	S&P 500 Return
January	5.10%	5.50%
February	-2.50%	-3.20%
March	-1.60%	-1.40%
April	2.70%	2.30%
May	0.40%	-0.10%
June	-1%	-0.40%
July	0%	0.50%
August	1.20%	1.30%
September	-0.60%	-0.20%
October	-3.40%	-4.10%
November	2.20%	1.40%
December	0.60%	0.50%

Using the Excel Data Analysis Tool, We get the required values:

R2 = 0.9584

Beta = 0.9238

Alpha = 0.001

Average return difference (with signs) and Average return difference (without signs) :

Month	Portfolio Return	S&P 500 Return	Return Difference	Absolute Return Difference
January	5.10%	5.50%	-0.40%	0.40%
February	-2.50%	-3.20%	0.70%	0.70%
March	-1.60%	-1.40%	-0.20%	0.20%
April	2.70%	2.30%	0.40%	0.40%
May	0.40%	-0.10%	0.50%	0.50%
June	-1%	-0.40%	-0.60%	0.60%
July	0%	0.50%	-0.50%	0.50%
August	1.20%	1.30%	-0.10%	0.10%
September	-0.60%	-0.20%	-0.40%	0.40%
October	-3.40%	-4.10%	0.70%	0.70%
November	2.20%	1.40%	0.80%	0.80%
December	0.60%	0.50%	0.10%	0.10%
		Average	0.08%	0.45%
			with sign	without sign