Calculate the percentage invested in each stock

Reference no: EM131910760

Asset Pricing

QUESTION

Select any 10 stocks from the FTSE 100 Constituent List (Data is available on the Learning Central).

1. Use the cut-off rate (C*) approach to construct the optimal portfolios for the period from 01/01/2011 to 31/12/2012.

You are required to calculate the percentage invested in each stock (X_i), the expected return (R ¯_P) and the standard deviation (σ_P)of the optimal portfolio under each of the following scenarios:

Risk-free lending and borrowing is allowed, but short-selling is not allowed.
Risk-free lending and borrowing as well as short sales (standard definition) are allowed.
Risk-free lending and borrowing as well as short sales (Lintner's definition) are allowed.

2. Use the single-index model to assess the performance of each of the three optimal portfolios in part (1) over the period from 01/01/2013 to 31/12/2013. Discuss your results.

3. Assume that at least one of the three optimal portfolios in (2) generates a significantly positive abnormal return. Can this finding be used as evidence against market efficiency? Support your answer with the relevant theoretical and empirical literature.

4. Use the single-index model to estimate the Betas for each of the 10 stocks in your sample for the periods from 01/01/2010 to 31/12/2010 and from 01/01/2011 to 31/12/2011.

5. Use Blume's (1975) technique to predict the stock Betas for the period from 01/01/2012 to 31/12/2013.

6. Compare the Betas generate from Blume's technique (part 6.) with those obtained from the single-index model for the period from 01/01/2012 to 31/12/2013. Discuss your results.

Attachment:- Coursework Assignment.rar

Reference no: EM131910760

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Reviews

len1910760

3/22/2018 3:02:48 AM

Submission The submission deadline is 19. Coursework must be submitted by 14:00pm on the submission deadline. Learning Central and one hardcopy must be submitted to the PG Hub. If you do not submit both copies then a mark of zero will be given. Note that late submissions will also be given a mark of zero.Dealing with problems within the group If there are any problems within a working group, then students should write a brief email (no more than 150 words) At the discretion of the module leader, the group may be called together to discuss these problems at a later date. If problems persist in the final days of the assignment, then students should submit a formal statement in writing. If this process reveals that there is a group member who has provided insufficient positive contribution to the assignment, then the right is reserved to give that student a mark below that of their group. We also strongly recommend that you minute group meetings and make notes of who contributed what to the assignment.

len1910760

3/22/2018 3:02:09 AM

This is an assessed piece of work that will account for 30% of the total marks available for this course. This is a team assignment with marks allocated equally to each member of any given group. Each group is to hand in one word-processed solution not exceeding 2,500 words plus numerical appendices. It is a requirement that a CD is included that contains the underlying data and that shows all major calculations. A word count must be placed on the front cover of the document; 2 marks (from the 30 available) will be deducted if there is no word count and 5 marks will be deducted if the examiner feels that there has been a deliberate attempt to give misleading information about the length of the assignment.

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