Assignment
Q1. Pick any three companies with shares currently listed on the ASX that have been trading for at least five years. Go to DatAnalysis (accessible via Deakin Library website) and download the adjusted month-end closing stock prices of these companies for the previous 61 months ended 31/10/2016 onto a MS Excel spreadsheet. Use the downloaded data and perform necessary calculations to answer the questions a) to c):
a) Compute the individual monthly returns, average monthly return, variance and standard deviation of the monthly returns for the stocks of the companies you have chosen.
b) Using the various statistics calculated in a), state which stock has the highest return, which stock has the highest total risk and which one has the highest return per unit of total risk.
c) Would the stock with the highest total risk in b) necessarily be the 'riskiest' of the three stocks? Discuss the components of total risk and circumstances in which you can minimize your portfolio risk.
Go to Yahoo Finance and download the adjusted month-end closing value of the ASX All Ordinaries Index (AORD) for last 61 months ended 31/10/2016. Perform necessary calculations to answer questions d) to f):
d) Use the month-end adjusted closing values of the AORD to compute individual monthly returns on the market index.
e) Briefly describe the beta estimation process as per the CAPM. Using the information in d) along with the individual monthly returns on each of the three stocks calculated in a), estimate their betas. What do these betas tell you about the riskiness of these three stocks relative to the market? Assuming a 2% p.a. risk-free rate, calculate the expected return on each of the three stocks using CAPM.
f) What would happen to the expected rates of return for a risk-free rate of 3.5% per annum? What would they be if the risk-free rate was 1.5%? Explain your observations in light of the risk-return relationship.
Q2. Assume you are a finance manager, you have a chance to implement a research project or further study a PhD, you need to write a short research proposal (no more than 3 pages) to apply funding or scholarship. What topic will you investigate? It needs to be fresh, cutting-edge, significant and fascinating by conducting some literature review using academic journals (Please see the List of Recommended Journals and Tips for Research Proposal).
Attachment:- Assignment.rar