Exercise

# Calculating the returns

In this lab, you will learn more about the analysis of stock returns by using the R packages `PerformanceAnalytics`

, `zoo`

and `tseries`

(click them for more information).

We obtained the price series for multiple stocks from 1998 to 2009. These price series are already loaded into your environment as `VBLTX_prices`

, `FMAGX_prices`

and `SBUX_prices`

. It is often convenient to store these time series in a single variable before we start the analysis. You will use the `merge()`

function to do that, since it merges series by column while taking into account the time index.

Remember that the continuously compounded returns are defined as the difference between the log prices. Once all price series are merged by column, you can easily calculate the continuously compounded returns. Use the `log()`

function to calculate the log prices and apply the `diff()`

function to the object that contains the log prices to get the continuously compounded returns.

Instructions

**100 XP**

- Assign to
`all_prices`

the merged price series`VBLTX_prices`

,`FMAGX_prices`

,`SBUX_prices`

such that each column contains the prices of one stock. - Calculate the continuously compounded returns with the help of the
`diff()`

and`log()`

functions. - Have a look at the data in the console.