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FMC5PMT Portfolio Management and Theory Mini-assignment III Department of Economics and Finance Latrobe Business School Latrobe University S1 2020. Due date: 24/05/2020, on or before 11.59 pm. Note:...

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FMC5PMT Portfolio Management and Theory
Mini-assignment III
Department of Economics and Finance
Latrobe Business School
Latrobe University
S1 2020.
Due date: 24/05/2020, on or before 11.59 pm.
Note: Use the data in the Excel work sheet named ‘Mini Assignment 3_data’ for this assignment. Using the data in Sheet 1 of the Excel data sheet, estimate the index model, ??? −??? =?? +?? (??? −???) +?? for the three stocks – AMBERTECH, AGL ENERGY and JB HI-FI. You need to use monthly return observations for the above companies and the market (All ordinaries index) together with the risk-free rate (three-month bank bill rate) for the period from 01 January 2017 to 01 December 2019 to estimate the index models.
1. Report the following for each stock: alpha, beta and co
elation with the market.
2. Which stock has the highest sensitivity to the movements in the market?
3. Which stock has the lowest sensitivity to the movements in the market?
4. What proportion of the variation in the return of each stock is explained by the movements in the market?
5. Calculate the market risk and the unique risk for each stock, and show that the sum of these two is equal to the variance of the stock.
6. Assume that you create a portfolio with the following weights: 25% in three-month bank bills, 20% in AMBERTECH, 30% in AGL ENERGY and 25% in JB HI-FI.
i. What is the beta of your portfolio?
ii. What is the market risk of your portfolio?
iii. What is the unique risk of your portfolio?
7. Using the data in sheet 2 of the Excel data sheet, calculate the following on a monthly basis for your portfolio from January to June 2017: actual return, expected return, abnormal return.
8. Based on your calculations in (7) above, explain whether your portfolio has outperformed or underperformed the market during the six-month period ending in June 2017.
END.
Answered Same Day May 25, 2021

Solution

Komalavalli answered on May 25 2021
140 Votes
Sheet1
    Date    Price-Ambertech    Price-AGL    Price-JBH    Price-All Ordinary Share Indes    90 days bank Accepted bill rate        Expected returns        rt Ambertech    rt AGL    Rt pJBH    Rt All Ordinary Share Indes
    1/1/17    0.16    22.6    27.65    5675    2.61        1.0436707426        0    -0.065091507    0.0304778501    -0.0150405074
    2/1/17    0.16    24.120001    26.82    5761    2.62        1.0438632312        -0.2231435513    -0.089185625    0.0823445937    -0.0244851076
    3/1/17    0.2    26.370001    24.700001    5903.799805    2.63        1.0441500478        0    -0.014681197    0.0004049403    -0.007391615
    4/1/17    0.2    26.76    24.690001    5947.600098    2.66        1.0443873286        0    0.0154399603    0.0657002568    0.0318246835
    5/1/17    0.2    26.35    23.120001    5761.299805    2.68        1.044458209        0.2876820725    0.0327898228    -0.0107551043    -0.0004685683
    6/1/17    0.15    25.5    23.370001    5764    2.69        1.0445524998        0.1431008436    0.0564666117    -0.1070278881    -0.001716067
    7/1/17    0.13    24.1    26.01    5773.899902    2.70        1.0441024035        -0.0741079722    0.0045747636    0.1173506465    -0.0004155604
    8/1/17    0.14    23.99    23.129999    5776.299805    2.65        1.0439351499        0.0741079722    0.0261838855    0.0091205412    0.0054508179
    9/1/17    0.13    23.370001    22.92    5744.899902    2.63        1.0441738464        -0.0741079722    -0.0781647301    0.0008729813    -0.0395058759
    10/1/17    0.14    25.27    22.9    5976.399902    2.66        1.0447637559        -0.0350913198    0.0111421766    -0.0305334829    -0.0078501221
    11/1/17    0.145    24.99    23.610001    6023.5    2.72        1.0450667331        0.1484200051    0.025533261    -0.0548025869    -0.0235926235
    12/1/17    0.125    24.360001    24.940001    6167.299805    2.75        1.0450435174        0    0.0384984765    -0.1587225988    0.0033782951
    1/1/18    0.125    23.440001    29.23    6146.5    2.75        1.0445995528        0.0408219945    0.0697854789    0.119023931    0.0047620233
    2/1/18    0.12    21.860001    25.950001    6117.299805    2.70        1.0411992998        -0.0408219945    0.0082683519    0.0054096732    0.0414535848
    3/1/18    0.125    21.68    25.809999    5868.899902    2.36        1.0405736561        -0.1133286853    -0.0023036177    0.0042709442    -0.0339549719
    4/1/18    0.14    21.73    25.700001    6071.600098    2.30        1.0400971591        -0.1017826943    -0.0168838143    0.068853954    -0.0085116506
    5/1/18    0.155    22.1    23.99    6123.5    2.25        1.0389600728        -0.0317486983    -0.0170484165    0.0632332736    -0.0267795773
    6/1/18    0.16    22.48    22.52    6289.700195    2.15        1.0389875698        0.0317486983    0.0220382205    -0.0573804141    -0.0120893701
    7/1/18    0.155    21.99    23.85    6366.200195    2.15        1.0389050154        0.1017826943    0.0565967708    -0.1015797928    -0.0096295273
    8/1/18    0.14    20.780001    26.4    6427.799805    2.14        1.0388498733        -0.2787134025    0.0635765682    0.0469168801    0.0160432203
    9/1/18    0.185    19.5    25.190001    6325.5    2.14        1.0392067893        0.2436220827    0.0800427077    0.0909529141    0.0673850646
    10/1/18    0.145    18    23    5913.299805    2.17        1.0389875698        0    -0.0440168323    -0.0073641225    0.0281259439
    11/1/18    0.145    18.809999    23.17    5749.299805    2.15        1.0397490424        0    -0.0909024856    0.0454724563    0.0069641522
    12/1/18    0.145    20.6    22.139999    5709.399902    2.22        1.0409919612        0.1892419996    -0.0390339892    -0.0103349381    -0.0391405296
    1/1/19    0.12    21.42    22.370001    5937.299805    2.34        1.0405999435        0    0.0098523436    0.0304085136    -0.0517589499
    2/1/19    0.12    21.209999    21.700001    6252.700195    2.30        1.0403891031        0    -0.0260601538    -0.1395615556    -0.0014383432
    3/1/19    0.12    21.77    24.950001    6261.700195    2.28        1.0407310925        0    -0.0209098527    -0.0323371624    -0.0247171053
    4/1/19    0.12    22.23    25.77    6418.399902    2.31        1.0401504169        0.1823215568    0.0785818357    -0.0872700778    -0.0113709618
    5/1/19    0.1    20.549999    28.120001    6491.799805    2.26        1.0373567787        0    0.0266287437    0.0841705015    -0.0314483334
    6/1/19    0.1    20.01    25.85    6699.200195    2.01        1.0371837557        -0.0953101798    -0.0468606486    -0.1518822897    -0.0290549192
    7/1/19    0.11    20.969999    30.09    6896.700195    1.99        1.0365126355        0.0953101798    0.1007613531    -0.0892798279    0.0292042019
    8/1/19    0.1    18.959999    32.900002    6698.200195    1.93        1.0343576245        0    -0.0104933285    -0.0328878061    -0.0151719953
    9/1/19    0.1    19.16    34    6800.600098    1.76        1.0340749215        -0.0953101798    -0.0318466042    -0.0856379122    0.0040815168
    10/1/19    0.11    19.780001    37.040001    6772.899902    1.73        1.0342322553        -0.1278333715    -0.0313536001    -0.0099396116    -0.0255245072
    11/1/19    0.125    20.41    37.41    6948    1.75        1.0343888981        0.328504067    -0.0058623029    -0.0069259203    0.0211783717
    12/1/19    0.09    20.530001    37.669998    6802.399902    1.76
Expected returns and co
el
                                    Expected returns
    Expected returns        rt Ambertech    rt AGL    Rt pJBH    Rt All Ordinary Share Indes            rt Ambertech    rt AGL    Rt pJBH    Rt All Ordinary Share Indes            rt Ambertech    rt AGL    Rt...
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