Portfolio construction Coursework 1. Efficient Diversification (Total 40 marks) (SN41% T ie) You need construct a portfolio included 30 assets. Collect the daily data on the assets (stock price and market value) stock market index, risk free rate 1 If from 2014.01.01 to 2020.3.31. You are required to: (1)Describe how to select these 30 assets? (Assets classes: stock, bond, real estate, commodity, derivative, fund or based on the factors) 30 (2)Construct the 'efficient frontier'. (Simulation and draw the efficient frontier) (3)Derive the CML and calculate the value of the equilibrium price of risk (slope) (4)Is the stock market index can express the market portfolio? (5)Shown the returns of the equally weighted( +X portfolios that consist of the 10, 20 and 30 shares already selected. (You can also use the weight you want to allocale to each stock), TE ( ABA) (6)Is the calculated frontier stable over time? If not what does this imply for an investment strategy? (2014.1.1- 2015.6.1, 2015.6.1-2017.12.31, 2018.1.1-2020.3.31) ET 45 2. Testing CAPM (Total 20 marks) c) Estimate by time series on each stock: Under the null hypothesis that the CAPM holds, retrieve the beta for each firm. Describe whether these stocks are aggressive stocks or defensive stocks? c) Construct"-":) *, that is the average (over the given time period) excess return for each stock. Then run cross-section regression: a. Testing the two null hypothesis for CAPM, decide whether CAPM is valid or not? b. Then test the hypothesis that this relationship is linear in risk or not, add beta' in the model portfolio! (5)Shown the returns of the equally weighted portfolios that consist of the 10, 20 and 30 shares already selected. (You can also use the weight you want to allocate to each stock), Mat ( 1 ) (6)Is the calculated frontier stable over time? If not what does this imply for an investment strategy? (2014.1.1- 2015.6.1, 2015.6.1-2017.12.31. 2018.1.1-2020.3.31) TA 2. Testing CAPM (Total 20 marks) Estimate by time series on each stock: Under the null hypothesis that the CAPM holds, retrieve the beta for each firm. Describe whether these stocks are aggressive stocks or defensive stocks? 2 Construct that is the average (over the given time period) excess return for each stock. Then run cross-section regression: a. Testing the two null hypothesis for CAPM, decide whether CAPM is valid or not? b. Then test the hypothesis that this relationship is linear in risk or not, add beta' in the model. 3. Portfolio Construction and Performance Evaluation (Total 40 marks) (1) Without paying a great deal of attention to the econometric issues that are inherent in these studies construct 2 portfolios of 30 stocks each (you may wish to apply some sorting procedure, e.g. by average size, beta, P/E, momentum effect). Construct the equally weighted portfolio (large beta or small beta; large market value or small market value; low P/E and high P/E, last win and lose), calculate the Sharpe ratio, Treynor ratio, Information ratio, Jensen's alpha for each portfolio and explain which portfolio you will invest? 15/15 ispit (2) Select any mutual fund you are interested, analyse this funds strategy, and what's the performance for this fund in recent year. Portfolio construction Coursework 1. Efficient Diversification (Total 40 marks) (SN41% T ie) You need construct a portfolio included 30 assets. Collect the daily data on the assets (stock price and market value) stock market index, risk free rate 1 If from 2014.01.01 to 2020.3.31. You are required to: (1)Describe how to select these 30 assets? (Assets classes: stock, bond, real estate, commodity, derivative, fund or based on the factors) 30 (2)Construct the 'efficient frontier'. (Simulation and draw the efficient frontier) (3)Derive the CML and calculate the value of the equilibrium price of risk (slope) (4)Is the stock market index can express the market portfolio? (5)Shown the returns of the equally weighted( +X portfolios that consist of the 10, 20 and 30 shares already selected. (You can also use the weight you want to allocale to each stock), TE ( ABA) (6)Is the calculated frontier stable over time? If not what does this imply for an investment strategy? (2014.1.1- 2015.6.1, 2015.6.1-2017.12.31, 2018.1.1-2020.3.31) ET 45 2. Testing CAPM (Total 20 marks) c) Estimate by time series on each stock: Under the null hypothesis that the CAPM holds, retrieve the beta for each firm. Describe whether these stocks are aggressive stocks or defensive stocks? c) Construct"-":) *, that is the average (over the given time period) excess return for each stock. Then run cross-section regression: a. Testing the two null hypothesis for CAPM, decide whether CAPM is valid or not? b. Then test the hypothesis that this relationship is linear in risk or not, add beta' in the model portfolio! (5)Shown the returns of the equally weighted portfolios that consist of the 10, 20 and 30 shares already selected. (You can also use the weight you want to allocate to each stock), Mat ( 1 ) (6)Is the calculated frontier stable over time? If not what does this imply for an investment strategy? (2014.1.1- 2015.6.1, 2015.6.1-2017.12.31. 2018.1.1-2020.3.31) TA 2. Testing CAPM (Total 20 marks) Estimate by time series on each stock: Under the null hypothesis that the CAPM holds, retrieve the beta for each firm. Describe whether these stocks are aggressive stocks or defensive stocks? 2 Construct that is the average (over the given time period) excess return for each stock. Then run cross-section regression: a. Testing the two null hypothesis for CAPM, decide whether CAPM is valid or not? b. Then test the hypothesis that this relationship is linear in risk or not, add beta' in the model. 3. Portfolio Construction and Performance Evaluation (Total 40 marks) (1) Without paying a great deal of attention to the econometric issues that are inherent in these studies construct 2 portfolios of 30 stocks each (you may wish to apply some sorting procedure, e.g. by average size, beta, P/E, momentum effect). Construct the equally weighted portfolio (large beta or small beta; large market value or small market value; low P/E and high P/E, last win and lose), calculate the Sharpe ratio, Treynor ratio, Information ratio, Jensen's alpha for each portfolio and explain which portfolio you will invest? 15/15 ispit (2) Select any mutual fund you are interested, analyse this funds strategy, and what's the performance for this fund in recent year
