Posted: February 5th, 2015

Finance

Paper, Order, or Assignment Requirements

 

 

Task 1

 

1. 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)

 

1. 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

(10 per cent)

Task 2

 

Assume that at the start of October 2012 you owned an equally weighted portfolio of the four companies.

 

3. Calculate the actual annual return on the FTSE All-Share Index for both years starting from October 2012 and October 2013.

(10 per cent)

 

1. 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

 

4. Calculate the actual annual returns for each company and for the portfolio over the period from October 2012 to October 2014.

(10 per cent)

 

1. 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)

 

 

Word Length:

There is a considerable amount of numerical work to be undertaken. The narrative components ought to be in the range of 1300 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.