– The Master’s subject is Finance, Leadership and Management.
– Please prepare a formative assessment (750 words) by following the following instructions: (As a portfolio manager, you need to form a portfolio of five stocks (Choose five stocks from S&P 500 constituent companies so that you can get data easily from Yahoo Finance). Please include the stock that you will choose in lecture 3 (AMZN)to run the Single Index Model. You are free to choose four other stocks. You can find stocks in Yahoo Finance. However, you need to justify why you have chosen those stocks.
You will need Micro forecasts for 5 stocks (Expected return, beta and residual standard deviation). These inputs will come from Single Index model. You need to obtain data from Yahoo finance
You will need the macro forecast for Treasury bills and passive equity portfolio (expected return and standard deviation). Please choose all the stocks from the same market (e.g. UK, US) otherwise you will have problems with respect to Treasury Bills and the passive equity (market) portfolio.
Required:
Calculate expected excess returns, alpha values, and residual variances for these stocks.
Construct the optimal risky portfolio.
What is the Sharpe ratio for the optimal portfolio?
By how much did the position in the active portfolio improve the Sharpe ratio compared to a purely passive index strategy?
What should be the exact makeup of the complete portfolio (including the risk-free asset) be for an investor with a coefficient of risk aversion of 3?
You will need to submit an excel file showing all the calculations.
Submit a report justifying your choice of 5 stocks and showing the above calculations (in excel).
– please use an accurate subject;
– Please rely on the uploaded resources and use other resources as well.
– Please use the Harvard referencing style to cite books, articles, and
other sources like websites.
– Do not use AI as the University has an AI deductor.
– Please share the draft with me two days before the deadline.
