Analysis of the Risk Exposure of a Company

Costco in China
1)Select a firm with international operations (minimum of 20 percent of sales or assets abroad) that is publicly traded.
We decide write Costco in China, please use this topic.
2)Obtain information about the firm such as which products it sells, where it does business etc.
3)Identify the major risks faced by the firm and whether it hedges its risk exposures or not. This information is typically reported in the firm’s annual report or the statements filed with the regulatory body in the firm’s home country.
4)Collect data on the four major risk factors that you have identified in (3) and the stock return of the firm (note that one of these risk factors must be an exchange rate). Test for a statistical relationship between changes in the risk factors and the stock return (regression analysis). Use the last 5-years worth of daily, or monthly data for your analysis. Note that two different exchange rates count as two risk factors.
5)Determine whether these changes are in line with what you would expect, given what you know about the firm’s operations.
6)Write a report up to eight pages long (12 point font, 1.5 spaced, double-sided printing is encouraged, just staple the final report and do not put a plastic cover on the report). Attach the printout of your statistical analysis on a separate page as an appendix. References and appendix are additional to the eight-page report.
The report should include:
(1)A description of the firm, its businesses and geographical operations etc., and how and why you expect the firm to be impacted by certain exchange rates and other risk factors.
(2)The statistical analysis, including an interpretation of the results.
(3)Comments on the relationship between (1) and (2).
7)Upload your report and your empirical analysis and include all the data used on blackboard so that I can check these if needed.

Sample Solution

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