Assignment:
Pick 2 REIT stocks and 2 Equity stocks. preferably from yahoo finance or google finance and answer the following questions: I choose these companies (Activision Blizzard-Abbott Laboratories. Equity stocks), (Camden Property Trust - AvalonBay Communities.) I attached a Excel and mathematical data which I did and there is a Sample project.
1. Brie?y discuss each of the REIT stocks and equity stocks that you picked for your project.
2. Using a twelve year holding period (2005 - 2017), calculate the average annual return for each equity stock, and for each REIT stock for the entire period. Use the formula:
3. Compare the standard deviation of each individual security over the entire period. Which is the riskiest security and which is the least risky based on the Standard Deviation?
4. Paying special attention to the most recent U.S. housing crisis, break down your data set and compare the risk and return attributes of your individual securities over the pre-crisis period, crisis period and the post-crisis period. Which security was most affected by the crisis and which security was least affected? Comment on your findings.
Pre-crisis: Oct2003-June2007; post-crisis April 2009-present; crisis July 2007-march 2009
5. Calculate all possible cross-correlations (REIT1 vs REIT2, Stock1 vs Stock2, REIT1 vs Stock1, REIT1 vs Stock2, REIT2 vs Stock1 and REIT2 vs Stock2). How has the correlation among these securities changed over time? Plot each of the price series and comment paying special attention to the most recent US housing crisis.
6. Build three separate portfolios and allocate weights as you wish for each portfolio. Portfolio 1 is the real estate only portfolio, Portfolio 2 is the equity only portfolio and Portfolio 3 is the combined real estate and equity portfolio. Calculate portfolio returns (based on average annual return that you calculated in question 2). Use the following formula:
Where Ws are the weights and Rs are the annual returns.
7. Compare the returns of the real estate only portfolio (Portfolio 1),the equity only portfolio (Portfolio 2), and the combined portfolios (comprised of both real estate and equity) (Portfolio 3). Which portfolio was most affected by the crisis and which portfolio was least affected? Please discuss the performance of the three portfolios in depth paying special attention to the concept of diversi?cation.
8. Calculate, betas of the individual stocks and each portfolio (1,2 and 3) over the entire period. Use the standard deviations that you calculated in question number 3. Remember, you need to use the following formula to calculate the standard deviation of portfolios:
9. Paying special attention to the most recent U.S. housing crisis, break down your data set and compare the risk and return attributes of each of your three portfolios for the all sub-periods (pre-crisis and post-crisis).
10. Use one of the investment performance measures that we have learnt in class (such as Treynor ratio) and compare the performance of the individual securitiesto those of each of the three portfolios(Portfolio1, 2 and 3)on a risk-adjusted basis for the entire period and for each of the sub-period. Discuss your results as it relates to portfolio diversi?cation bene?ts.
Attachment:- Security Selection.pdf