Problem Description: The blockchain is a decentralized ledger of all transactions across a peer-to-peer network. Using this technology, participants can confirm transactions without a need for a central clearing authority (or a middle man). According to some, replacing the middle man with a revolutionary technology that is faster, cheaper and as secure will greatly improve market efficiency. One application of blockchain technology in finance is the cryptocurrencies, with the best known example being Bitcoin. Some believe that such a secure, global, and digital currency represents the future of finance, while some are not optimistic about the future of Bitcoin and cryptocurrencies in general.

Useful links on blockchain and cryptocurrencies:

https://www.data61.csiro.au/en/our-work/safety-and-security/secure-systems-and-platforms/blockchain

https://www.pwc.com/us/en/industries/financial-services/fintech/bitcoin-blockchain-cryptocurrency.html

Your task is to evaluate recent prices of Bitcoin and based on this evidence whether individuals should invest in Bitcoin. There are two parts to this assignment, each of which is described in detail: Part A (Group Work: 2 + 2 + 2 + 2 + 4 + 3 + 3 + 4 = 22 marks; professional report = 8 marks)

Locate the data file (Assignment Bus Stats.xls) on CANVAS.

1. Using the most appropriate type of graph to present weekly closing price of the Bitcoin and provide a general description. Hint: What are the main features of this graph, is there a trend? [Topic 1]

2. Calculate the weekly return and construct a histogram. Does the data appear normally distributed? Is there evidence of outliers? Hint: the formula for a return is (Current Price Previous price)/Previous price multiplied by 100 [Topics 1-3]

3. Calculate and interpret the three aspects of Descriptive Analysis, Location, Shape and Spread, for weekly return. [Topic 1]

4. What is the empirical probability of a loss? [Topic 2]

5. Repeat the same steps (steps 1-4 above) for the three Singapore share prices Singtel, Wilmar International and Olam International.

6. Construct a 95% confidence interval of the return to Bitcoin, and interpret the interval. How does your interval change if the level of confidence is 90% and 95% respectively, and explain why. [Topics 6-7]

7. Construct a 95% confidence interval of the return to Singtel, Wilmar International and Olam International respectively. [Topics 6-7]

8. An investment advisor claimed that the return to Bitcoin is 4% while the returns to other three shares are no different from zero. Do you agree? Justify your reasoning using a two-tailed hypothesis test approach at the significance level of 5%. [Topic 8]

Part B (Individual Reflective Piece, 10 marks) Write a ministerial brief of no more than 200 words containing no more than three graphs on whether you can confidently recommend investing in the Bitcoin, compared with ONE of three shares: Singtel, Wilmar International and Olam International. Each student within a group has to comment on a different comparison. Hint: draw on the evidence you have gathered from Part A, as well as other information/evidence not covered here but you believe is useful.