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1. You are a financial analyst in the risk management department of the pension fund. Your manager has requested the following: a) Construct a diversified
1. You are a financial analyst in the risk management department of the pension fund. Your manager has requested the following: a) Construct a diversified portfolio consists of two assets and calculate the efficient portfolios. a) The data could be obtained from Bloomberg or yahoo finance. b) b) Select three companies (from different sectors) listed in FTSE 100, FTSE 250, S&P 400, S&P 500 or S&P 600. c) Show the expected return, standard deviation and covariance for each portfolio of two companies (1&2, 1&3, and 2&3) d) The data period of analysis is 5 years (monthly data from 2015 to 2019). e) Use intervals of 10% for the different weights. f) Identify the global minimum-variance portfolio. 2. Retrieve monthly stock and benchmark returns and perform a regression analysis to estimate your chosen companies' betas using the Capital Asset Pricing Model (CAPM). a) The data could be obtained from Bloomberg or yahoo finance. b) Select 5 companies from different sectors (listed in FTSE 100, FTSE 250, S&P 400, S&P 500 or S&P 600) over the period (2015-2019). c) Which company has the lowest risk? d) Show the descriptive statistics for the 5 firms. Do you think this analysis is important? e) Select relevant monthly market risk-free rates for a 5-year period. Discuss the choice of your risk-free rates. Evaluate your results. f) Calculate Treynor ratio and interpret its results
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