Finance and Accounting

Finance and Accounting.

Finance and Accounting

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Portfolio Optimisation and Portfolio Performance Measure

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Project description

This coursework is designed to illustrate the practical aspects of portfolio optimization and the performance measurement. This exercise involves the

following tasks.

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1. By doing the optimization using Excel Solver, you are required to construct a mean variance efficient portfolio frontier for any 10 randomly selected ordinary shares listed on a stock market. For all your calculations, you should use the 60

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monthly returns, sample means, standard deviations, and co-variance and correlation matrices. Plot the portfolio frontier and comment on the weights of

the portfolios along the portfolio frontier including in your discussion the correlations among the 10 shares.

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2. By Identifying and combining a risk-less asset with the 10 shares, plot the portfolio frontier and select the tangent portfolio on the portfolio frontier.

Provide the rationale for your choice of the riskless asset.

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3. Assume that the short selling is not allowed, how your efficient frontiers would differ from those with short selling allowed in questions 1 and 2 above.

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4. Identify the appropriate benchmark index and critically evaluate the performance of the tangent portfolio selected above using various risk-adjusted

portfolio performance measurement indices. Justify your choice of the benchmark index.

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5. Comment on the limitation of your analysis and critically evaluate the gains in

the performance of the identified portfolio along with the associated risks from international diversification, particularly investment in the shares listed on emerging stock markets.

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Portfolio Investment Analysis

Coursework

BAF_

6

_

PIA

Business

2013



14

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6

Portfolio Optimisation and Portfolio Performance

M

easurement

This coursework is designed to illustrate

the

practical aspects of portfolio

optimisation and

the

perf

ormance measurement. This exercise involves the

following tasks.

1.

By doing the optimisation

using Excel Solver, you are required to c

onstruct a

mean variance efficient portfolio frontier

for any 10 randomly selected ordinary

shares listed on a stock marke

t. For all your calculations, you should use the 60

monthly returns, sample means, standard deviations, and covariance and

correlation matrices.

Plot

the portfolio frontier

and comment on the weights of

the portfoli

os along the portfolio frontier

including

in your discussion the

correlations among the 10 shares.

2.

By Identifying and combining a riskless asset with the 10 shares, plot the

portfolio frontier and select the tangent portfolio

on the portfolio frontier

.

Provide the rationale for your choice of t

he riskless asset.

3.

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Assume

that the

short selling is not allowed, how

your efficient frontiers would

differ from those with short selling allowed in

questions 1 and 2 above.

4.

I

dentify the appropriate benchmark index and critically evaluate the

performance

of the tangent portfolio selected above using various

risk



adjusted

portfolio performance measurement indices. Justify your choice of the

benchmark index.

5.

Comment on the limitation of your analysis and

critically evaluate

the gains in

the performance of t

he identified portfolio

along

with the associated risks

from

international diversification,

particularly

investment in the shares listed on

emerging

stock

markets.

You are expected to demonstrate the knowledge, understanding and effective use

of the analy

tical tools, underlying theory, and concepts taught in the lectures and

seminars

.

Make sure that the random sample of shares for this exercise should be chosen by

yourself

and must not be borrowed or copied from any

of your

class

mate

s

. You will

be provide

d with the instructions for using Excel Solver in one of the seminars.

Submission Deadline:

Tuesday

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,

6

May

201

4

Submitting your coursework

Deadlines

You must make sure that you submit your coursework by the publicised deadlines. It is

your responsibility to make sure you’re aware of your deadlines.

It is very important that you let us know if you’re unable to meet the deadline for

submit

ting your coursework, or if you won’t be able to attend an examination. If you

can’t meet a deadline then you should contact your

Faculty Office

before

the due

date.

Handing in at your Faculty Office

You should complete

:

A

Coursework Submission Form

;

Hard copy of your course work

;

A

copy of the Turn



It



In” report

; and

And a soft copy on a CD/USB

The Faculty Office can get very busy during hand



in periods so to save time you

should complete the Submission Form before you submit your c

oursework.

Your

Faculty Office

will date stamp your Coursework Submission Form and give you a

receipt which you should put in a safe place as it’s your only proof of submission.

Late Submission of written coursework

Key points to note are:

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Late submis

sion is only permitted for written coursework and dissertations.

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Late submission is permitted up to two weeks without extenuating circumstances.

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Undergraduate and Masters work is treated exactly the same.

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Work submitted late is marked as normal but the mar

k given to the work is capped at

the pass mark. The only exception to this is when a student has DDS arrangements

in place.

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Work submitted more than two weeks late receives a capped mark of zero.

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There is no extension available for referred coursework. Ref

erred coursework

submitted late always receives a mark capped at zero.

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A cap on a mark can always be lifted if there are valid extenuating circumstances.

Information on the extenuating circumstances procedure can be found on my.lsbu.

If you are unable to

hand in your work by the deadline you should complete the

Late or

Non Submission of Assessment Form

available on my.lsbu.

If you are registered with Disability & Dyslexia Support

Your arrangements with

Disability & Dyslexia Support (DDS)

could include

pr

ovision

for late submission of

coursework.

You should inform your Course Director or Year

Tutor and make sure you fill out a

Late or Non Submission of Assessment

Form

detailing that you have this

arrangement in place.

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Finance and Accounting

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