EFN412 Advanced Aspects of Domestic and International Business Finance

 

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Assignment Details:-

• Course Code: EFN412
• Course Title: Advanced Managerial Finance
• Referencing Styles: APA
• Words: 3250
• University: Queensland Univeristy of Technology
• Country: AU

 

Assignment Task:-

 

You are asked to construct an Equity Investment Portfolio comprised of 4 assets (stocks) from the ASX/S&P200 Index. Your analysis will include daily data from the past 5 years, from December 31, 2014, to December 31, 2019. Ignore transaction costs and taxes. The proxy for the market portfolio is the S&P/ASX200 Index, and the risk-free proxy is the 90 day Bank Accepted Bill rate (BAB).

 

 A. Portfolio Construction

i. Download the price data of your 4 assets (and the portfolio benchmark) for the period from December 31, 2014, to December 31, 2019. The price data should be daily. You can find the price data from various sources, such as Yahoo Finance (https://au.finance.yahoo.com).

ii. Download the daily data for the risk-free rate. You can get the 90 day Bank Accepted Bill rate from https://www.rba.gov.au/statistics/tables/#interest-rates. You will find these rates by clicking on “Interest Rates and Yields – Money Market – Daily – F1” You need to use the daily data in order to be consistent in terms of frequency.

iii. Estimate the mean return and standard deviation of each investment asset

iv. Calculate the mean return and standard deviation of the market portfolio (ASX/S&P200)

v. Calculate the mean return and standard deviation of the equally-weighted portfolio comprised of the four assets

vi. Generate the variance/covariance matrix for the individual assets, your portfolio, and the market portfolio

vii. Calculate the Sharpe ratio (S=(Rp-Rf)/ p) for the individual assets, your equally weighted portfolio, and the market portfolio.

viii. Construct the CML based on the market portfolio and the risk-free asset. Chart the CML

 

B. Portfolio Optimization

Using the Solver Add-in function in Excel, determine the optimal weights for the 4 assets in your portfolio. Optimal weights will be those that give you a portfolio with the highest mean return for a given level of risk (hint: you want to maximise the Sharpe Ratio by allowing the weights for each asset to change). You must provide a detailed record of solver procedures.

Note: Assume NO borrowing is allowed. You will need to constrain each of the weights to be between 0 and 1.

Please present a brief summary of your analysis of Part B.l

 

C. Firm Analysis

Please answer the following question in the Word document.

Compare the 4 firms in your portfolio in terms of:

– Capital Structure

– Payout Policy

– Multiples (such as PE ratio)