Implement a simplified long-short solution

Reference no: EM133137945

AFIN3053 Advanced Corporate Finance - Macquarie University

Context

You're an equity analyst that was recently head-hunted by a hedge fund seeking your expertise in a particular stock. The hedge fund has hired you on a short-term contract to:

1. Construct a 3-statement integrated discounted cash flow (DCF) valuation spreadsheet model with a 10-year horizon on the stock in which you specialise. They've given you a standardized template to complete. This is your individual assignment.

2. Team up with fellow analysts to devise and present a video recording of

Project: The senior management of Invest 'Em All decided to implement a simplified long-short solution. The senior would like to provide custom made investment solutions to the clients with fewer stocks in the portfolio. This investment solution will be a portfolio of the risk-free asset and an optimal risky portfolio of 4 stocks with highest Sharpe Ratio in the training period. Write a proposal to the senior management to address the following tasks.

Tasks:
1. Provide details related to investor utility, including the theory and assumptions.
2. Suggest how one's utility can be optimised under the mean-variance portfolio framework.
3. Use the data from the group project and find the optimal risky portfolio of 4 stocks with highest Sharpe Ratios in the training period.
4. Uses the average of the digits in your student ID as your risk aversion coefficient to find a custom optimal portfolio. Comment on this portfolio and list out the assumption that you have made in the calculation. (E.g if your student ID is 45678901, your risk aversion coefficient is A=5)
5. Other comments or discussions you find relevant.

Report (Page limit: 4 including appendix):

1. Executive Summary

2. Address all tasks in previous section

3. Conclusion

4. Appendix (if any)

5. References

You are suggested to use 2-3 pages for part 1-3, the remaining will be Appendix and references. Cover page or content page are not counted in the page limit.

Attachment:- Group-Project_Excel.rar

Reference no: EM133137945

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