Assume you have AUD100,000 that you must invest in stocks.
- Construct a portfolio of 5 stocks from the data provided. Design the portfolio in any which way you deem fit. Justify your portfolio selection and design.
(5 marks)
Data: daily stock price, beta and some fundamental indicators (P/B, ROE, etc) for 10 stocks for the last 4 months covering consumer staples, banking, pharmaceutical and consumer services (discretionary) sectors.
Assessment criteria:
- Basis and reasons for selecting the 5 stocks should be based on fundamental analyses. Qualitative analyses will be considered provided the arguments are rigorously justified.
- Clarity of objective/strategy of the portfolio and how its allocation will meet the stated objective.
- Full details of portfolio in a table format with appropriate narrative of all relevant transactions that may occur in real world investment.
- Once you have set up your portfolio; hedge your portfolio using index futures contracts. In order to do this you will need to:
- Determine your hedging objectives
- Calculate the beta of your portfolio, and
- Work out the optimal number of positions to hedge your long stocks position.
- Justify the decisions and/or assumptions you make.
(9 marks)
Data: daily indices cash and futures prices for the relevant markets and 4 sectors over the same 4 months period
Assessment criteria:
- Clearly stated hedging objective(s), determined in light of earlier portfolio objective and prevailing market conditions.
- Explanation for how a long/short position in index futures contribute to meeting that objective.
- Justification for the selected index futures contract.
- Calculation of portfolio beta, hedge ratio and other relevant transactions that may occur in real world investment with evidence.
- Hold your hedged portfolio (of stocks and index futures) for a period of two weeks. At the conclusion of this period, evaluate the effectiveness of your hedge, the reasons for its success or failure and how the outcome could be improved. Discuss if your hedging objectives have been met.
(8 marks)
Assessment criteria:
- Comparison of the result from the hedged and unhedged portfolio
- Effectiveness of the hedge and reasons why the hedge strategy worked/failed to work as expected
- Discuss how the hedge can be improved taking into account the shortcomings you identified above
. assignment 2 data 202151-1 - Excel A rong wang BIG ; X NE - 11 22 . 47 . IN 19 BIU- = E, = = = % 6 - 15 f 0.94 c F 0 N 0 P 210P EDUCATION BRETA DATE PREDUCATO CAF.CATIONS EDUCATION BETA : NATIONAL AIRRAN NATIONAL MARANKA NATIONAL ME RANK DAFICATIO DA EDUCATION BOR 14: COMMON.FRI TERROEN COROWER THRK OF COMMON FAITH KOSAS EST INTEREST PATE NAPRETA . SOLID 110 -21.30 IST 1.23 2235 23 GER 1148 10AE 9898 20 1118 G 18 13: 2008 1420 23 BB 211 - 123 9103 1996 Fou RE 110 -2130 - - -2136 -2011 . CEIT XEST TIT . ETIT 1997 2122792 10 2122769 : 2135 1437 CESA ETC - wa .. can 161 136 10 !: TET 115 131 1420 26 TC --- 190 1208 13 OLD 2 FT 28 TBD 9:31 209 CIT 4 2011/12 2133 BOLA 11111 . SOLLAS 1 BECUE BOLD 18 19 10 ZULLU 108134 11 SOL11 2165 117 112 15 2001 IST 16 1: RTS 14 946 REET 2893 19 131 123 -2130 LED TBD CRIT 213379281 343 1441 0. 1138 138 13 DOLLS 2133 1221 93 TBD 0937 2413 -21.30 13 12 19 196 85 20 360 194 113 TIT -21.30 12: 2333 BRI 18 1:23 1118 TES 134 . 113 151 9426 19 ma 161 196 094 7698 909 12 11 2012 2133 -21.30 1023 988 TITO 1.23 18 AM 1128 140 094 3978 21297 120 12: 1993 213 2:13278051 134 113 121 938 GE 981 W 1671 TBD La -13 -2011 -3130 -L3 9129700 : LT 134 TET 956 IT -122791 ATT BTT . 18 . 1741 10 ZR 720 -120 226 can 13 14 50/7005 LE IST TED La ETIT 91297095 :: 2033 -2130 2495 17: 956 AR 210 REIT 143 13 1 12 13 9130 132 --- -- ETIT :: 13 136 11 118 136 -2130 IST BRO 1:13 2193723 : CE 120 ID U19 20:00 27 2339 19 1925 1:58 176 116 17.71 12 210 19 01 893 1138 13 20 200L2/15 . IST 98 CBI 0034 213 1:13 C. 17 - 213 13 - 2130 19 6 196 TO 8391 11 1118 09 90 121 21937932: 11 2122792 219760 20 2001111 1175 0120 10 - 81 2012/1 11: 19 1763 044 RA 11 12 1990 110 12: 17 256 203 1923 11. -213 176 GER 094 GTE 200 136 12: 17.56 094 138 1990 2122769 9129700 2122769 -13 - SS 2012/2 100 1.00 123 10 TED EFIT HET LE : 123 05 130 . - REIT . CIT 2012 ST3 can ... ILOT LOL -330 131 13 28 TBD BLE : 212370961 LE 21:01:26 88 TL 3-1 195 18 8431 REIT 2014 19 20 SOLS 10 19 - -21.30 ET ETIT 100 138 120 1609 1 118 14 21 2013 2013 1:23 1760 TOT -21.30 13: 23 TBD OC DO 2013 1:13 21257992: 20 3: 1 1968 996 4758 21 1118 1 CS 145 191 15 COT T 13 243 17.20 211 1123 13378981 110 1 al 175 FIL 199 45 2013/10 -- 17a 256 212 1113 212979993 26 PAL 1 SE 10 GER ASAR 150 1TS 361 1 1A 2.0 105 BETO 14 23 2840 21: 212279091 203 4T 2011/12 2A 31/1 144 14.45 1700 TOT - 1170 262 EEST 1997 264 LAE 49 2001-920 1.025 -2130 12 17. 27 28 SEIT 145 CODOLAT 1703 SEE 094 9731 ETIT LAE IDC SUMMARY STOCK DATA US FUTURES AUSTRALIAN INDICIES AND FUTURE + Su & T. 17 . assignment 2 data 202151-1 - Excel A rong wang BIG ; X NE - 11 22 . 47 . IN 19 BIU- = E, = = = % 6 - 15 f 0.94 c F 0 N 0 P 210P EDUCATION BRETA DATE PREDUCATO CAF.CATIONS EDUCATION BETA : NATIONAL AIRRAN NATIONAL MARANKA NATIONAL ME RANK DAFICATIO DA EDUCATION BOR 14: COMMON.FRI TERROEN COROWER THRK OF COMMON FAITH KOSAS EST INTEREST PATE NAPRETA . SOLID 110 -21.30 IST 1.23 2235 23 GER 1148 10AE 9898 20 1118 G 18 13: 2008 1420 23 BB 211 - 123 9103 1996 Fou RE 110 -2130 - - -2136 -2011 . CEIT XEST TIT . ETIT 1997 2122792 10 2122769 : 2135 1437 CESA ETC - wa .. can 161 136 10 !: TET 115 131 1420 26 TC --- 190 1208 13 OLD 2 FT 28 TBD 9:31 209 CIT 4 2011/12 2133 BOLA 11111 . SOLLAS 1 BECUE BOLD 18 19 10 ZULLU 108134 11 SOL11 2165 117 112 15 2001 IST 16 1: RTS 14 946 REET 2893 19 131 123 -2130 LED TBD CRIT 213379281 343 1441 0. 1138 138 13 DOLLS 2133 1221 93 TBD 0937 2413 -21.30 13 12 19 196 85 20 360 194 113 TIT -21.30 12: 2333 BRI 18 1:23 1118 TES 134 . 113 151 9426 19 ma 161 196 094 7698 909 12 11 2012 2133 -21.30 1023 988 TITO 1.23 18 AM 1128 140 094 3978 21297 120 12: 1993 213 2:13278051 134 113 121 938 GE 981 W 1671 TBD La -13 -2011 -3130 -L3 9129700 : LT 134 TET 956 IT -122791 ATT BTT . 18 . 1741 10 ZR 720 -120 226 can 13 14 50/7005 LE IST TED La ETIT 91297095 :: 2033 -2130 2495 17: 956 AR 210 REIT 143 13 1 12 13 9130 132 --- -- ETIT :: 13 136 11 118 136 -2130 IST BRO 1:13 2193723 : CE 120 ID U19 20:00 27 2339 19 1925 1:58 176 116 17.71 12 210 19 01 893 1138 13 20 200L2/15 . IST 98 CBI 0034 213 1:13 C. 17 - 213 13 - 2130 19 6 196 TO 8391 11 1118 09 90 121 21937932: 11 2122792 219760 20 2001111 1175 0120 10 - 81 2012/1 11: 19 1763 044 RA 11 12 1990 110 12: 17 256 203 1923 11. -213 176 GER 094 GTE 200 136 12: 17.56 094 138 1990 2122769 9129700 2122769 -13 - SS 2012/2 100 1.00 123 10 TED EFIT HET LE : 123 05 130 . - REIT . CIT 2012 ST3 can ... ILOT LOL -330 131 13 28 TBD BLE : 212370961 LE 21:01:26 88 TL 3-1 195 18 8431 REIT 2014 19 20 SOLS 10 19 - -21.30 ET ETIT 100 138 120 1609 1 118 14 21 2013 2013 1:23 1760 TOT -21.30 13: 23 TBD OC DO 2013 1:13 21257992: 20 3: 1 1968 996 4758 21 1118 1 CS 145 191 15 COT T 13 243 17.20 211 1123 13378981 110 1 al 175 FIL 199 45 2013/10 -- 17a 256 212 1113 212979993 26 PAL 1 SE 10 GER ASAR 150 1TS 361 1 1A 2.0 105 BETO 14 23 2840 21: 212279091 203 4T 2011/12 2A 31/1 144 14.45 1700 TOT - 1170 262 EEST 1997 264 LAE 49 2001-920 1.025 -2130 12 17. 27 28 SEIT 145 CODOLAT 1703 SEE 094 9731 ETIT LAE IDC SUMMARY STOCK DATA US FUTURES AUSTRALIAN INDICIES AND FUTURE + Su & T. 17
