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BE313 – Portfolio Analysis

COURSEWORK

(Deadline: Wednesday 14 Dec 2022)

The requirements for this coursework are as follows:

1. The coursework consists of data collection, analysis and interpretation. Although you may discuss the project with others, the coursework must be written up individually. You may receive reduced or no marks if there are strong similarities between the work handed in by two or more people.

2. All questions are to be answered.

3. The work must be tidy and answers clearly stated.

4. Excel is required to acquire the results. You must clearly show how results were obtained by inserting the relevant spreadsheet screenshot(s) under each question. However, you are not required to upload the Excel file. You will only need to upload this word document.

5. An equation editor must be used to type equations.

6. This must be your own work. The University may employ software to check for any evidence of plagiarism (please see below for more information on plagiarism).

7. You may include references if it is appropriate to do so.

8. The assignment must be word processed, font Times New Roman or Arial, with a font size of 12 and with lines double-spaced. All work should be spell-checked and read carefully for typos before handing in.

9. Check that you have answered the question that is asked and that your response provides a logical reasoned answer.

10. The bibliography should contain only those sources you have referenced in your assignment. This does not mean that you should include all books/journals/websites you have read to research your assignment.

11. Referencing in your assignment should take the following forms:

The structural approach of Gilbert (1989) demonstrated that two demand side variables….

The behaviour of primary commodity prices is particularly important to many developing countries where a significant proportion of national income is generated by a small number of primary products (see Cashin et al., 2000).

A good explanation of the concept of cointegration can be found in Engle and Granger (1991).

These would be listed in the bibliography as follows:

Cashin, P., Liang, H. and C. McDermott (2000) How persistent are shocks to world commodity prices?, IMF Staff Papers, 47, 177-217.

Engle, R.F. and C.W.J. Granger (1991) Long-run economic relationships: readings in cointegration, Oxford University Press, Oxford.

Gilbert, C.L. (1989) The impact of exchange rates and developing country debt on commodity prices, Economic Journal, 99, 773-84.

Note: The first and the third references are journal articles and the second is a book.

12. Note that your coursework is to be submitted via FASer. The coursework should be uploaded to FASer by 10am on Wednesday 14 Dec 2022 (Week 11).

13. You are strongly advised to submit your work days prior to the actual deadline. You are also advised to store draft work that you can overwrite as this avoids risk of missing the deadline due to some unforeseen circumstances. 

YOU MUST READ THE INFORMATION WHICH FOLLOWS:

In submitting coursework online, it must be assumed that you have read and understood the following guidelines about plagiarism. Furthermore, in doing so you are agreeing to your work being monitored by the JISC Plagiarism Detection System if a lecturer should deem it necessary to do so.

University Regulation 6.12 & 6.13 states that

6.12(a) It is an academic offence for a student to cheat in any examination, or in any other submitted part of his or her University work, whether or not such work is formally assessed. "To cheat" includes:

(i) to copy the work of another candidate or otherwise communicate with another candidate in an examination;

(ii) to introduce any written, printed or electronically-stored information into an examination, other than material expressly permitted in the instructions for that examination;

(iii) to use the work of others (whether in written, printed or some other form) without acknowledgement, where a judgment is made that the work has been the result of serious negligence or of intention to deceive;

(iv) to repeat work previously submitted for a different assessed assignment without full acknowledgement of the extent to which that previous work has been used.

(b) It is an academic offence for a student knowingly to assist another student to cheat in any examination, or in any other piece of work, the mark for which will count either towards the student's result for the year, or towards his or her final degree classification.

(c) Allegations of academic offences involving cheating shall be dealt with in accordance with the Progress Procedures as determined by the Senate. Previous offences shall be taken into account.

6.13 In submitting any piece of University work (e.g., dissertation, thesis, essay or report) a student shall acknowledge any assistance received or any use of the work of others.

COURSEWORK

Download one-month daily stock prices for The Coca-Cola Company, PepsiCo, and Pfizer from Yahoo Finance which can be accessed free at home. Use daily adjusted close prices from 1^st Dec 2020 to 31^st Dec 2020 (DO NOT include 30 Nov 2020 price data; 31 Dec 2020 price data MUST be included; Hint: to include the price data on 31 Dec 2020, choose 1 Jan 2021 as the end date). 

1. Present in a table the name of the companies, the dates, the adjusted close prices and the returns (in %). The table must fit in one page only. Example:

[10 marks]

2. Calculate the average return and variance of returns for each company.  [24 marks]

3. Calculate the variance-covariance matrix and correlation matrix for each company above.

4. Select the two companies from question 3 with the lowest correlation coefficient. Use 5 different combinations of portfolio weights from the below table for the two companies to create 5 different portfolios. Calculate the expected return and standard deviation of each portfolio. Present the results in the following table:

[30 marks]