ASSESSED COURSEWORK
(Deadline: Tuesday 10 December 2019)
The assessment for BE313 is by this coursework and a Final Examination. This
piece of coursework is worth 30% of the overall assessment of BE313. The
requirements for this coursework are as follows:
1. The coursework consists of data manipulation, analysis and interpretation.
Although you may discuss the project with others, the coursework must be written
up individually. You may receive reduced or no marks if there are strong
similarities between the work handed in by two or more people.
2. All questions are to be answered.
3. The total word count must be printed on the front page. There is a maximum limit
of 1,500 words.
4. The work must be tidy and answers clearly stated.
5. You must present all relevant details and show clearly how results were obtained.
For instance, if you calculate returns like this (Pt − Pt− 1)/Pt− 1 then you need to
specify what Pt and Pt-1 are, and provide an example based on your data.
6. An equation editor must be used to type equations.
7. This must be your own work. The University may employ software to check for
any evidence of plagiarism (please see below for more information on plagiarism).
8. You may include references if it is appropriate to do so. References are not
included in the word count.
9. The assignment must be word processed, font Times New Roman or Arial, with a font size of 12 and with lines double-spaced. All work should be spell-checked and read carefully for typos before handing in.
10. Check that you have answered the question that is asked and that your response provides a logical reasoned answer.
11. The bibliography should contain only those sources you have referenced in your assignment. This does not mean that you should include all books/journals/websites you have read to research your assignment.
12. Referencing in your assignment should take the following forms:
The structural approach of Gilbert (1989) demonstrated that two demand side variables…..
The behaviour of primary commodity prices is particularly important to many developing countries where a significant proportion of national income is generated by a small number of primary products (see Cashin et al., 2000).
A good explanation of the concept of cointegration can be found in Engle and Granger (1991).
These would be listed in the bibliography is follows:
Cashin, P., Liang, H. and C. McDermott (2000) How persistent are shocks to world commodity prices?, IMF Staff Papers, 47, 177-217.
Engle, R.F. and C.W.J. Granger (1991) Long-run economic relationships: readings in cointegration, Oxford University Press, Oxford.
Gilbert, C.L. (1989) The impact of exchange rates and developing country debt on commodity prices, Economic Journal, 99, 773-84.
Note: The first and the third references are journal articles and the second is a book.
13. Note that your coursework is to be submitted via FASer. The coursework should be uploaded to FASer by 10:00 on Tusesday 10 December 2019 (Week 11).
14. You are strongly advised to submit your work days prior to the actual deadline. You are also advised to store draft work that you can overwrite as this avoids risk of missing the deadline due to some unforeseen circumstances.
YOU MUST READ THE INFORMATION WHICH FOLLOWS:
In submitting coursework online it must be assumed that you have read and understood the following guidelines about plagiarism. Furthermore in doing so you
are agreeing to your work being monitored by the JISC Plagiarism Detection System if a lecturer should deem it necessary to do so.
University Regulation 6.12 & 6.13 states that
6.12(a) It is an academic offence for a student to cheat in any examination, or in any other submitted part of his or her University work, whether or not such work is formally assessed. “To cheat” includes:
(i) to copy the work of another candidate or otherwise communicate with another candidate in an examination;
(ii) to introduce any written, printed or electronically-stored information into an examination, other than material expressly permitted in the instructions for that examination;
(iii) to use the work of others (whether in written, printed or some other form) without acknowledgement, where a judgment is made that the work has been the result of serious negligence or of intention to deceive;
(iv) to repeat work previously submitted for a different assessed assignment without full acknowledgement of the extent to which that previous work has been used.
(b) It is an academic offence for a student knowingly to assist another student to cheat in any examination, or in any other piece of work, the mark for which will count either towards the student’s result for the year, or towards his or her final degree classification.
(c) Allegations of academic offences involving cheating shall be dealt with in accordance with the Progress Procedures as determined by the Senate. Previous offences shall be taken into account.
6.13 In submitting any piece of University work (e.g. dissertation, thesis, essay or report) a student shall acknowledge any assistance received or any use of the work of others.
COURSEWORK
Download stock prices for any three different companies from Bloomberg – 22 daily closing prices for each company. Use prices from September 2018 onwards.
1. Present in a table the name of the companies, the dates, the prices and the returns (in %). The table must fit in one page only, and it does not count towards the word limit. Example:
Company A
Company B
Company C

[5 marks]
2. Calculate the average return and variance of returns for each company
(a) Briefly discuss the results. Compare them with the theory discussed in class e.g. are there any companies that dominate other companies? (Maximum of 200 words)
[10 marks]
3. Calculate the variance-covariance matrix and correlations for each company above.
[5 marks]
4.
(a) Select the two companies from question 4 with the highest correlation coefficient. Use different weights for the two companies in order to create N combinations, with N > 8. Calculate the expected returns and standard deviations of each combination. Present the results in a table e.g.

[5 marks]
(b) Repeat step 5(a) above using the two companies from question 4 with the lowest correlation coefficient.
[5 marks]
5. Draw the Markowitz Efficient Frontier (MEF) using the Tables from question 5(a) and 5(b). Identify in the graphs the Minimum Variance Portfolio.
[10 marks]
6.
(a) Discuss the results obtained in question 6 for each one of the two MEF e.g. explain why some portfolios are preferred to others, the shape/curvature of the MEF, the relevance of investors’ risk preference and the selection of an optimum portfolio etc.
[15 marks]
(b) Based on the results obtained in question 6 would you choose an individual stock or a portfolio? Which stock/portfolio would you chose? Explain your choice based on the modern portfolio theory.
[15 marks]
7.
(a) Explain the relationship between the possibility of lending and borrowing at a risk-free rate and the MEF.
[15 marks]
(b) Would the existence of a risk-free asset change your answer in question 7(b)? Discuss.
[15 marks]