# Assignment Brief, Assignment Guidelines: M042LON Assignment Number and Weighting:

Coursework 1 (40%) Anonymous marking Yes

Submission Date and Time

• Date: See Aula submission link
• Time: See Aula submission link

Expected return of feedback and marked work Assessment Format

Individual coursework Submission Procedure

• Electronically via Aula (Turnitin) Word Count

1600 Maximum for part B Assignment Title

CW1

Assignment is in the form of calculations and critical analysis on diversification, provide abstract, introduction, methodology, data analysis and conclusion. References and appendices are not part of the word count.

Tables, charts, graphs & calculation must be described in detail. Data Excel Sheet Attached

Valuation of Securities and Equity Trading Module Code: M042LON

Individual Assignment 40% PART A

• Calculate daily returns for all the series provided within Excel Sheet (5P)
• Calculate daily log returns for all the series provided within Excel Sheet. (5P)
• Calculate daily volatility for all the series provided within Excel Sheet (5P)
• Estimate Annualized returns and Annualized volatility for all the series within Excel Sheet (5P)
• Calculate Beta for each series without using regression analysis using 2 years data. Use market proxy as S&P 500 and DJ30 (5)
• Now calculate Beta for each series using 1-year data using S&P500. What can you say about the Beta stability by varying series length? (5P)
• Use Excel’s regression analysis to estimate Beta of MSFT and APPL, using two years of data. Use DJ 30 as a market proxy. (5P)
• Construct a technology return Index using equally weighted stocks : MSFT, APPLE, CISCO, and INTEL and estimate Beta with respect to S&P Index both using 1 year data and 2 years data. What can you say about the stability of Industry Beta? (5P)
• Using 5 stocks of your choice from the Excel Sheet , construct an optimal portfolio that maximise Sharpe’s ratio – Hint: excel template from lecture 5. Explain your working (15P)
• Find a minimum variance portfolio for 3 assets of your choice from excel sheet using Excel Solver. Explain your working (10P)
• Using CAPM, find expected returns for all the stocks in Excel Sheet using S&P 500 as market proxy (5)
• Draw the Security Market Line (SML) for question no 11. Explain how you can use SML with forecasted returns to identify overvalued, undervalued and just valued stocks (5P)

PART B:

Maximum word limit for part B -1600 words

Portfolio diversification is an investment strategy that contributes to mitigation of portfolio loss and volatility. Develop a critical analysis on portfolio diversification and its key benefits for the protection of investors from the unpredictability of markets. Support your answer by academic references and your own analysis. All concepts should be expressed in your own words; any material copied from another source should be clearly indicated as such and referenced. (25P)