1. Go to au.finance.yahoo.com and download the ending monthly share prices for Rio Tinto for the last 60 months. Use the adjusted closing price, which adjusts for dividend payments and share splits. Next, download the ending value of the All Ordinaries index over the same Page 457period. For the historical risk-free rate, go to the Reserve Bank of Australia website (www.rba.gov.au) and find the RBA statistical table F1.1 (interest rates and yields—money market; 90-day bank bills). Download the data. What are the monthly returns, average monthly returns, and standard deviations for Rio Tinto shares, the 90-
day bank bills and the All Ordinaries for this period? Joey Moss, a recent finance graduate, has just begun his job with the investment firm of Covili and Wyatt. Paul Covili, one of the firm’s founders, has been talking to Joey about the firm’s investment portfolio.
As with any investment, Paul is concerned about the risk of the investment as well as the potential return. More specifically, because the company holds a diversified portfolio, Paul is concerned about the systematic risk of current and potential investments. One such position the company currently holds is shares in Rio Tinto Ltd. Rio Tinto is the well-known UK and Australia registered mining and exploration company.
Covili and Wyatt currently uses a commercial data vendor for information about its positions. Because of this, Paul is unsure exactly how the numbers provided are calculated. The data provider considers its methods proprietary, and it will not disclose how share betas and other information are calculated. Paul is uncomfortable with not knowing exactly how these numbers are being computed and also believes that it could be less expensive to calculate the necessary statistics in-house. To explore this question, Paul has asked Joey to do the following assignments.