Spreadsheet “daily returns” in file “Data For Finance Coursework.xlsx” provides daily price
and total returns series for IBM, DIS, and LUV for the period 16/11/2020-12/11/2021. Daily
total return incorporates daily price change and any relevant dividends for the same day,
while price return incorporates daily price change only. The series are adjusted for the stock
splits etc.
a. Using only the data provided, estimate the Dividend Yield (discretely compounded) of
IBM, DIS, and LUV as of 12/11/2021. (Hint 1: how much return on IBM stock came from
the dividends? Hint 2: Consider using the properties of continuously compounded returns
which you can eventually convert into discretely compounded returns) in your calculations.
b. On 12-11-2021, IBM stock closed at $119. Could you fit a simple equity pricing model
with a set of reasonable parameters to justify this price? You are free to utilize any
information you might find useful, including your answers to the earlier questions.


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