Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

FBE 506 Quantitative Methods in Finance

Instruction on Course Project:

Download monthly data from January 2016M1 to 2023M10 to estimate the followings:

1. Select at least five stocks from different industries (for the list of the firms in different industries see, https://biz.yahoo.com/p/sum_conameu.html).

2. Construct a portfolio of the selected stocks using data from 2016M1 to 2019M12.

a. Find the optimum weights using MPT.

b. Graph the efficient frontier.

c. Find the tangency point of the Capital Allocation Line (CAL) and the efficient frontier.  

d. Calculate the CAL equation and graph CAL and the efficient frontier on the same coordinate system.

3. Allocate $100.00 among the selected stocks using adjusted monthly closing prices at 2020M1. January 2020 will have a value of 100 as an index.

a. Using the adjusted closing prices from 2020M1 to 2023M6 calculate the holding values of your portfolio (assume fixed holdings with no re-balancing taking place over time).

4. Estimate CAPM for your portfolio using data from 2020M1 to 2023M8. Graph the estimated b of the CAPM and the average return of your portfolio as a point relative to SML. Comment how your portfolio compares to S&P500.

5. Test whether the shut-down of US economy due to COVID-19, 2020M3 – 2020M8 had any effect on Jensen alpha and the market risk of your CAPM model.

6. Calculate CV, Sharpe, Treynor, and Sortino ratios for your portfolio and compare them to a similarly diversified portfolio of Vanguard, Fidelity, or any other similar portfolio.

7. Calculate 2% VaR as a percentage of the mean return of your portfolio when the risk horizon is one month, six months, and one year. Calculate the same VaRs for the selected portfolio in item 6. Compare the VaRs of your portfolio to the ones of the market portfolios.

8. Graph the scatter diagram of your portfolio and comment on trends, outliers, structural breaks and any other special features. Graph the scatter diagram of your portfolio and S&P 500 on the same coordinate system and compare the trends.

9.  Using the CAPM equation of your portfolio do two periods ex-post forecasting of the returns to your portfolio and compare your forecast to the actual returns. Find the accuracy statistics of your forecast and report them.

10. Using CAPM equation do two-periods ex-ante forecasting of returns to your portfolio for 2023M9 and 2023M10.

12. Do a naïve forecasting of the your portfolio index, MA₍₁₅₎, and Exponential Smoothing of your portfolio indices for the period 2020M1to 2023M8. Find the accuracy statistics of your forecasts. Compare the forecasting accuracy criterion for the three forecasting methods.  Which one results in a better forecasting outcome?