Posted: November 27th, 2014
CAPM and Portfolio Analysis
This document is designed to supplement information contained in the University’s Web based Module Information Directory http://mid.coventry.ac.uk/midhome.html
Students should consult the MID entry for information on;
Module summary Teaching Learning and Assessment
Module resources Module organisation.
1. Module delivery
If you have a disability or medical condition and need an adjustment to allow you to fully participate in this module (e.g. different format of literature, clear communication for lip reading, breaks for medication, etc.) please tell your lecturer so that arrangements may be made.
1.1 Teaching Plan
To complete the module successfully, attendance at all classes is advised. Students are also expected to work independently, undertake any required background reading or practice exercises and actively participate in seminars or other small group work. If allocated to a seminar group, students should remain with that group.
Week Method of Delivery Topic
1 L + S Introduction to portfolio management.
2 L + S The measurement of risk and return
3 L + S Markowitz portfolio theory.
4 L + S The Capital Market Line and the CAPM
5 L + S Using the CAPM for portfolio management.
6 L + S Testing the CAPM – Single Index Model.
7 L + S Efficient market theory.
8 L + S Passive fund management and EMT.
9 L + S Active fund management and alpha returns.
10 L + S Behavioural finance and the critique of modern portfolio theory.
1.2 Module tutors
Module Leader Room E-mail Telephone
Tony Kilmister WM121
Surgery hours: Monday 12.00-2.00.
Tuesday 11.00-1.00
Messages can be left at reception in the William Morris building or emailed to the tutor.
1.3 Use of Module web
The module web will be used to convey module resources such as lecture and seminar handouts and announcements.
2. Module Assessment
The assessment method and coursework weighting can be found in section 1 of the MID entry for this module on http://mid.coventry.ac.uk/
The assessment for this module consists of one examination [70% of module mark] and one coursework [30% of module mark]. The coursework assessment takes the form of one piece of written work.
2.1 Coursework Assignments
Further details will be published on the module website.
2.2 Coursework deadlines
Coursework Assignment Day Month Year
5 December 2014
Late Work
All work submitted after the submission deadline without an approved reason will be given a mark of zero. This is not the same as a non-submission, as a late submission counts as an attempt and a mark of zero may allow you to resit the coursework (see section 2.6 on referrals).
You should note that short deferrals (extensions) of up to three calendar weeks can only be given for genuine “force majeure” and medical reasons, not for bad planning of your time. Please note that theft, loss, or failure to keep a back-up file, are not valid reasons. The short deferral must be applied for on or before the submission date. You can apply for a short deferral by submitting an Examination/ Coursework Deferral Application Form. Application Forms along with the supporting evidence should go to the relevant Student Support Office (WM404 or GE103), for undergraduates, or Postgraduate Reception (WMG29). For a longer delay in submission a student may apply for a (long) deferral. See your programme manager for details.
Examination/Coursework Deferral Application Forms are available from the BES reception, the Student Support Offices in WM and GE buildings, or the BES Faculty website.
2.3 Coursework submission
Details of the arrangements for coursework submission are set out in the document “Coursework Submission”. If you did not collect a copy of this document at enrolment you can download it from the BES Faculty website or collect a copy from reception.
You should always enter your name and complete all other details on a BES coursework cover sheet and also ensure that your student ID number and the module number are on the front page of the coursework itself.
You must check that all your coursework marks have been recorded accurately on the module web and notify your module tutor if you believe a mistake has been made.
NB. It must be stressed that all marks notified to you during the year are provisional until confirmed by the end of year Subject Assessment Board. It is possible that notified marks may be raised or lowered by this board.
Students MUST keep copies (electronic or photocopies) of all coursework submitted on this module.
2.4 Plagiarism
Students are advised to consult the University Regulations* and their course handbooks regarding the penalties for and definition of plagiarism, which essentially is the deliberate and substantial insertion in your own work of material from someone else e.g. a published source such as a book or article, or simply another student’s piece of work, without acknowledging the extent or source or clearly marking up the quotation in inverted commas.
*To view regulations use the University website.
USE OF TURNITIN
1. Whenever requested by your module leader, you should upload a WORD copy of your work onto the relevant icon on your module web for plagiarism checking. If you do not do this then your work will not be marked.
2. Drafts of assessed work for any particular module should only be uploaded onto the draft icon on that module web, as this draft icon will be configured so that the final submission will not flag up overlaps with the draft submission. If you submit a draft onto any other module web then Turnitin will identify any overlaps with your final submission as plagiarised.
3. You should never submit anyone else’s work onto Turnitin under your own name and you should never ask anyone else to submit your work onto Turnitin under their name.
4. Normally students are only allowed to submit one draft of an assessment via Turnitin. If the guidance on plagiarism has been followed, and the student has written the work themselves, this should be sufficient.
For further guidance on the use of Turnitin please see your module web, ask your tutor or contact the CUOnline helpdesk.
2.5 Form of Examination
The examination will comprise a two hour unseen paper.
You are reminded that the form of the examination may be subject to revision. More information on the structure of the examination paper and what is expected of students in the examination will be provided during the revision session.
2.6 Referral
You must have attempted the coursework (and examination, if appropriate) at the first attempt to be eligible for a re-sit.
If you are referred in a coursework component you will be normally required to submit a complete new set of assignments. Students should look on the BES Faculty website to obtain referred work for assessments and the exact deadline date. (The deadline will be normally be in mid-August, just before resit examinations commence.) The referred examination timetable will be published on the university website
3 MODULE RESOURCES
The essential textbook(s) recommended for purchase is / are:-
Author Date/
Edition Title Publisher Library shelf number
EJ Elton, MJ Gruber, SJBrown & WN Goetzmann 2010
8th Edition Modern Portfolio Theory and Investment Analysis Wiley 332.6 ELT
R A Strong 2009 Portfolio Construction, Management, Protection South Western 332.645 CUT
3.1 Web sites
Site url Comments
Bloomberg www.bloomberg.com
Financial Times www.ft.com
Reuters www.reuters.co.uk
Yahoo Finance finance.yahoo.co.uk
I.M.F www.imf.org
World Bank www.worldbank.org
OECD www.oecd.org
A variety of subject generic Web links are accessible via the BES Faculty website.
3.4 Other resources
Additional resources can be found in the module’s Moodle site
4. MODULE HANDOUTS
Students enrolled on this module will have the handouts detailed below made available to them via this web site.
4.1 Lecture Notes
Topic Location
Introduction to portfolio management. CUonline
Markowitz portfolio theory. CUonline
The capital asset pricing model. CUonline
Applying CAPM to portfolio analysis. CUonline
Testing the CAPM. CUonline
Efficient market theory. CUonline
Passive fund management and EMT. CUonline
Active fund management and alpha returns. CUonline
4.3 Past examination papers
Copies of previous years’ examination paper can be accessed online via CURVE.
Students are warned that the format of the examination paper may be subject to variation.
Faculty of Business Environment and Society
Module No MODULE TITLE Date
M19EFA Portfolio Management 2014-15
Coursework Title: CAPM and Portfolio Analysis
Contributes 30% to total module mark
Submission: By 5th December 2014
This assignment should be submitted to Turnitin via Moodle.
Please note:
1. All work submitted after the submission deadline without an approval will be given a mark of zero. (This is not the same as a non-submission, as a late submission counts as an attempt and a mark of zero may allow you to resit the coursework).
2. Deferrals can be granted on the basis of mitigating circumstances. Please note that reasons such as theft, loss or failure to keep a back-up file are not valid reasons for deferral. For guidance on applying for deferrals, see the course student handbook.
Students MUST keep a copy and/or an electronic file of their assignment.
The electronic version of your assignment may be used to enable checks to be made using anti-plagiarism software and approved plagiarism checking websites.
Word Length:
There is a considerable amount of numerical work to be undertaken. The narrative components ought to be in the range of 1000-1500 words.
Learning Outcomes Assessed
In completing this assignment the students should be able to:
1. Demonstrate an ability to apply appropriate numerical and quantitative techniques to measure security returns and price volatility.
2. Demonstrate an ability to apply appropriate numerical and quantitative techniques to measure portfolio returns and risk.
3. Engage in an informed assessment of discussions and debates relating to methods of portfolio analysis.
Return of Marked Work
Marked work will be returned online. You should expect to have marked work returned to you by 3 weeks after the submission date
PLAGIARISM WARNING – Assignments should not be copied in part or in whole from any other source, except for any marked up quotations, that clearly distinguish what has been quoted from your own work. All references used must be given, and the specific page number used should also be given for any direct quotations, which should be in inverted commas. Students found copying from the internet or other sources will get zero marks and may be excluded from the university.
Coursework Tasks
The accompanying Excel spreadsheet provides five years of monthly adjusted share price data for four companies. They are:
Easyjet PLC Airlines
Marston’s PLC Brewing
Balfour Beatty Construction
Pace Technology
The spreadsheet also lists the corresponding values for the FTSE All-Share Index
Task 1
a. Using the first three years of data (October 2009 to October 2012) regress the monthly log-normal returns of the five companies against the log-normal returns for the FTSE All-Share Index. (You can use the Regression function in Excel ‘Data Analysis’)
(15 per cent)
b. Briefly analyse the relationship of the individual security performances to the performance of the FTSE All-Share, focusing in particular on the alpha, beta and R2 estimates.
(10 per cent)
Task 2
Assume that at the start of October 2012 you owned an equally weighted portfolio of the four companies.
a. Calculate the actual annual return on the FTSE All-Share Index for both years starting from October 2012 and October 2013.
(10 per cent)
b. Take the FTSE All-Share returns as market returns and, using the alpha and beta sample estimates generated in Task 1, calculate the expected annual returns for each asset and for the portfolio using the Single Index Model approach.
(10 per cent)
Task 3
a. Calculate the actual annual returns for each company and for the portfolio over the period from October 2012 to October 2014.
(10 per cent)
b. Compare the actual and expected returns and comment on the scale of the abnormal returns over the two-year period from October 2012 to October 2014 for both the individual companies and the portfolio.
(15 per cent)
Task Four
Assess how well the model performed in predicting the actual return on the portfolio, given that it was based on a restricted sample of historical data.
(30 per cent)
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