Calculate continuously compounded daily returns

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Reference no: EM132167004

Analytical Methods Assignment -

You allocated company can be found in the "ASX200 List" file in Group Assignment folder under resources. For example, if you enroll in Group 29, then Bellamy's Australia (Ticker: BAL) is your allocated company. Please note, as we need to download two year of historical data for the company (see assignment question for detail), you need to check whether your allocated company has valid and enough observations over the sample period. If the allocated company has less than 378 observations (1.5 year observations, 252+126), please contact me, you group with be assigned a new company.

Questions: You are invited to work as a quantitative analyst at an investment firm, and you have been directed to prepare a report for an S&P/ASX 200 company's performance.

Part A -

(A.1) Download the daily adjust close S&P/ASX 200 index and daily adjust close price of your assigned company's stock for the period of 1 November 2016 - 30 October 2018 (via Yahoo Finance).

(A.2) Write a brief overview of the S&P/ASX 200 index and of your assigned company. (About 200 words each)

(A.3) Calculate continuously compounded daily returns for both the S&P/ASX 200 index and your company's stock.

(A.4) Obtain descriptive statistics for S&P/ASX 200 index and for your company's stock prices, as well as their returns obtained in (A.3), respectively.

(A.5) Construct separate time series graphs for S&P/ASX 200 index and its return, also your company's stock prices and its returns.

Part B -

(B.1) Construct the frequency distributions (including relative frequency and cumulative frequency) for S&P/ASX 200 index and for your company's stock prices. Use 25 intervals.

(B.2) Based on returns calculated in (A.3), obtain a histogram for S&P/ASX 200 daily index return and a histogram for your company's stock daily returns. Use the number of bins of 25.

(B.3) Based on returns calculated in (A.3), calculate the values of (i) mode, (ii) median, (iii) mean, (iv) first quartile.

(B.4) Calculate the mean values and the standard deviation of daily returns for S&P/ASX 200 index for the first year and second year respectively. Obtain the percentage of values that are within one and two standard deviations of the mean. Which year of return has a larger variation? Give reason(s).

(B.5) Calculate target semi-variance of daily returns for S&P/ASX 200 index and your allocated company, where the target is the S&P/ASX200 or company incur daily loss.

(B.6) Compare the total risk of your allocated company versus that of S&P/ASX200 over the sample period. Does the conclusion change if you compare the coefficients of variation?

(B.7) Does the distribution of daily return for S&P/ASX 200 index and your allocated company have negative or positive skewness (comparing with Normal distribution) during the sample period? Give evidence for your conclusion.

(B.8) Do you think the distribution of daily returns of S&P/ASX 200 index is different from the distribution of daily returns of your company's stock? Provide evidence.

Part C -

(C.1) Test whether the mean returns of S&P/ASX 200 index and your company are significantly different from zero at 5% level of significance.

(C.2) Find the correlation between the S&P/ASX 200 index returns and your company's stock returns. Is the correlation statistically significant at 5% and 10% level? Describe your results.

(C.3) Assuming there is a linear relationship between your company's stock returns and S&P/ASX 200 index returns. You are invited to run a simple linear regression by using your company's stock returns being dependent variable, and S&P/ASX 200 index returns being independent variable.

Show the linear regression model you obtained, is the intercept coefficient significant at 5% level? Is the slope coefficient significant at 5% level? Give reason(s).
Show the confidence interval of the slope coefficient at 5% level.
Obtain the coefficient of determination, interpret it.
Obtain standard error of the estimate for your linear regression model.

Attachment:- Assignment Files.rar

Reference no: EM132167004

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