FIN9010M Portfolio Analysis Assignment.
Learning Outcome 1: Identify and critique the elements of portfolio theory.
Learning Outcome 2: Critically evaluate risks and returns relevant in the international securities market using financial data.
You are expected to collect data of stock prices and carry out mean variance optimization (MVO) using Excel Solver. Express your understanding about Risk, Return and Portfolio Theory by writing a 2,000-word report about your data processing, results analysis, explanation about your findings, the assumptions underlying MVO, and finally your recommendations for investors who want to hold that portfolio.
What you need to do?
Question 1. Access YahooFinance or Bloomberg to collect the daily stock price indices of the FTSE100 and any six (6) companies listed on the London Stock Exchange over the last 12 months (Hint: it is advised that you should select firms from different industrial sectors for diversification purpose). The price indices should be converted into return histories needed to find the efficient frontier.
Question 2. Plot the return histories of the stocks over time to see whether there is evidence of volatility clustering and provide descriptive statistics of data sample (mean, standard deviation, minimum, maximum return, skewness and kurtosis).
Question 3. Calculate alpha and beta values of each company stock return.
Question 4. Carry out MVO procedure with Excel Solver to find and plot the efficient frontier on a return- risk diagram. Do for both long only and long-shorts constraints. (The former means that allocations to assets must be >= 0. The long-short allows allocations to be < > 0).
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