Reference no: EM132397844
Assignment - Investment Management
Answer ALL the questions below:
Part I:
Obtain data on stock prices of 5 companies for 24 months, use yahoo finance or any relevant website.
The selected companies should not be from same industry.
Required (Use Excel as needed).:
a. Write a short paragraph describing the data you collected.
b. Calculate the monthly returns for each stock.
c. Calculate the average return, variance and standard deviation for each stock, for 24 months.
d. Construct an equally weighted portfolio of the selected 5 socks and calculate the portfolio average return, variance and standard deviation. Explain and discuss the relationship between your findings in c and d.
e. Construct both the covariance and correlation matrices for the selected securities and comment on the relationship between the stocks.
f. Estimate the betas of the selected 5 stocks using the following market model:
Ri= ai+ βiRM+ ?i
where:
Ri = the return on security i
RM = the return on the market index
αi = the intercept term
βi = the slope term
?i = the random residual error
g. i) Comment on what the value of the beta (the slope coefficients in the regression) indicates.
ii) determine the beta of your portfolio (use the relevant equation) and comment on your results.
iii) compare the estimated beta with the actual beta of the stocks, as shown by yahoo finance for example.
h. Calculate Sharpe ratio for each stock and select the best two stocks for potential investment.
Construct a portfolio of these two stocks. Next plot the efficient frontier line showing the global minimum variance portfolio. Explain your findings showing the best portfolio(s) for potential investment.
Part II
Write an essay on one of the following topics (Approximately 1500 words):
- Market anomalies
- Naïve diversification
- Technical Analysis vs Fundamental analysis
- Fintech in Investment Management
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