Multi- factor volatility of security at Charles Schwab Corporation

Abstract

This paper examined the rate of returns required by investors who invested at Charles Schwab (Discount Brokerage firm) from 30th September, 1987 to 29th August, 1997. The methodology adapted involved the use of a multi-factor stochastic model; APT. The study shows a low systematic risk of the security. There was ARCH effect on the idiosyncratic noise, and about 28.07% benchmark was the opportunity cost of capital that the investment had to beat to a good investment.

Keywords: ARCH effect, rate of returns, low systematic risk, opportunity cost of capital