10:41 all 2 & X FIN80O0OS5 Individual Assign... & School of Business, Law & Entrepreneurship Swinburne University of Technology FIN800O5 Individual Assignment 2 Risk and Return Case Study After learning about the risk and return topics, you are interested in performing some analysis concerning the risk and return trade-offs of various asset classes. You also learn about the benefits of diversification and would like to examine whether there are diversification benefits from investing across asset classes. In particular, you are interested in examining three stock and bond indices, namely S&P/ASX 200, S&P Australia Collateralized Bond Index and S&P ASX Small Ordinaries Index. You are growingly concerned about issues associated with sustainability outlined by the United Nations. Therefore, you are interested in examining two sustainable indices, namely the S&P ASX 300 Net Zero 2050 Climate Transition ESG Index and the S&P ASX All Australian 50 Fossil Fuel Free Index. All indices are listed as follows. You can click on the hyperlinks to find out more about these indices. S&P ASX 200 S&P Australia Collateralized Bond Index S&P ASX Small Ordinaries Index S&P ASX 300 Net Zero 2050 Climate Transition ESG Index 5. S&P ASX All Australian 50 Fossil Fuel Free Index BN e The indices or prices for these asset classes are available from the Excel File named 'FIN80005 Index levels for various asset classes'. They are real financial data downloaded from the S&P Global website. Perform the following requirements and write a business report of 1,500 words (excluding executive summary, table of contents, tables, figures, references, and appendix). Additional marks will be awarded for critical analysis and evaluation of the findings. Your report must be submitted in a Word/PDF format, with workings attached to the appendix of the report. Requirements: 1) Calculate the average return, standard deviation, and reward-to-risk tradeoff of these asset classes over the last five years from March 2019 to February 2024. Note that you are provided with index levels so you will have to calculate returns for these asset classes. Provide brief commentary on the historical performance. (10 marks) 2) Analyse the historical return relationships of these asset classes. Provide brief commentary on the correlations of these asset classes. (10 marks) 3) Form an equally weighted portfolio by investing the same proportion in the S&P/ASX200 Index, S&P Australia Collateralized Bond Index and S&P ASX Small Ordinaries index. Based on your portfolio, perform backtesting and calculate the average return, standard deviation, and reward-to-risk tradeoff, if you had held the portfolio for the last five years. Is the portfolio superior in terms of its risk and return combination compared to individual asset classes? (20 marks) 4) Repeat (3) above but now use all five asset classes. Form an equally weighted portfolio with these five asset classes. Perform backtesting and calculate the average return, standard deviation, and reward and risk tradeoff. if you have held the portfolio for the last five years. Compare and contrast the performance of your portfolios in (3) and (4), discussing the implications of diversification and sustainable investing. (20 marks) 5) Provide recommendations concerning diversification and sustainability investing based on your findings. (20 marks) 6) Writing Style and Grammar (10 marks) 7) Structure and Presentation of the report including references (10 marks) Dr Miraj Ahmmod FIN80005 Corporate Financial Management 2024 51 h