CW1 Part 2 (60% of CW1 and 30% of the total overall module mark)
You need to imagine that you have borrowed a total of £1,000,000 at 2% interest p.a. in perpetuity and that you have invested in the portfolio given in the excel spreadsheet titled 6EC501 CW1 EEC 14 August.
In the report (1500 words +/- 10%)* you will have to
Analyse your portfolio choices from a behavioural perspective and
Evaluate the asset allocation adopted applying the portfolio theory concepts studied.
Include a discussion of the purpose of the portfolio (i.e. long-term personal retirement savings) and how you believe that your portfolio fulfils the stated aim better than other possible portfolios. The report must discuss the biases that may have influenced your choice of assets – look at the reasons listed under our given portfolio tracking sheet. You must then make explicit reference to portfolio theory and analyse the portfolio allocation. Indicate how you think that your portfolio performance should be judged or bench marked over the long-term and address whether the portfolio in its reduced state (see details below) will serve your retirement goal after paying back the loan with interest. Below is a step-by-step guide to the report including the marking criteria.
Summative Feedback – you will be provided with summative feedback within 3 weeks of the final Aug EEC submission deadline of 14 th August 2020 11.59 pm.
You must stay within 1650 words – going over the max limit will result in the following penalties:
i. 10 marks deducted for exceeding the word limit by up to 250 words
ii. 20 marks deducted for exceeding the word limit by 251-500 words
iii. 30 marks deducted for exceeding the word limit by 501-750 words
iv. 50 marks deducted for exceeding the word limit by more than 750 words.
1.Start with the portfolio Excel spreadsheet used for tracking the performance of your given investments between 1 and 28 February 2020. Add a new worksheet (a new tab) in your Excel file with your portfolio of 10 assets. Copy the entire sheet containing the tracked portfolio and paste it in the new worksheet. In the newly added worksheet, change the amounts invested in each asset to £100,000 (so that now they have equal weights in the portfolio).
2.Add a new worksheet (a new tab) in your Excel file with your portfolio of 10 assets.
a. Use the Yahoo! Finance to look up and download historical prices for your 10 assets – monthly data for the last 5 years. Put these in one single Excel sheet (just like I have done for the seminars)
b. Calculate the expected rate of return for each asset (mean) and its risk (standard deviation)
c. Calculate the correlation matrix for your 10 assets.