Write a literature review on sustainable FDI in SSA. Include opportunities that make SSA a good place to invest sustainably like in green technologies and must include the challenges of this area ( SSA) as well.
Part 1 (Excel):
Assume you want to invest in a market with two risky assets and the risk–free rate. The numbers are
in the below table:
Risky Risky Risk-free
Asset 1 Asset 2 Asset
( ) 12.50% 7.50% 1.25%
25.50% 15.50%
12
0.65
It is possible to choose from eight different portfolios of risky assets, with weights:
Weight Weight
(Risky Asset 1) (Risky Asset 2)
Portfolio 1 -20% 120%
Portfolio 2 0% 100%
Portfolio 3 20% 80%
Portfolio 4 40% 60%
Portfolio 5 60% 40%
Portfolio 6 80% 20%
Portfolio 7 100% 0%
Portfolio 8 120% -20%
Show how it is possible to select the best risky portfolio, given the information you have.
Solve this part by doing the calculations on the Excel file and write the answer in Section 2 your
comments. If you want, you can help yourself with graphs to clarify your answers.
Part 2 (Excel):
Consider now a market where three funds can be traded, and you want to understand which is the
best investment for you, based on all the performance measurement tools learned in class. The
numbers are:
( ) Beta Tracking Error
Fund 1 10.50% 16.50% 0.10 18.00%
Fund 2 16.50% 23.50% 1.10 21.00%
Fund 3 35.50% 32.00% 0.50 22.50%
Index 15.00% 18.50%
Risk-free 1.25%
Write the solution in Section 2 of the excel and answer the following questions as well:
▪ Which fund(s) outperform the benchmark (index)?
▪ Which portfolio offers the highest compensation for risk?
▪ Which fund has the most consistent performance over time?
Discussion posts and trading activities for the class will take place in the Investment Game Workroom. Your required activity is outlined below:
Game registration and initial stock picks (2% of Course Grade)
Register for the game by following the instructions provided by your professor.
Assemble your initial portfolio prior to the close of the markets of Week2.
Week 2, post a brief rationale in the Investment Game discussion board:
Why did you choose your companies? Specifically, what market news, metrics, or other data led to you to pick these specific stocks?
Share resource(s) you consulted to make your choice.
Explain why you allocated your assets as you did.
What benchmark are you measuring yourself against and why?
You work for the 3 Rs Wealth Management LTD, an investment fund that specialises in financial securities investment. Your fund currently holds an international portfolio of equities including US, European, and Japanese stocks. The fund management is considering a further diversification of the fund portfolio and contemplates the possibility of investing in some emerging markets (in South Asia, Eastern Europe, and Latin America) or diversifying by adding different assets types including Fixed Income Securities, Any sector sectors Indexes, Commodities and Cash equivalent securities You are asked to analyse the optimality of such a diversification in the mean-variance framework. Your manager requires you to write a report that should summarise and critically discuss your empirical findings, as well as provide a recommendation about the inclusion of emerging market stocks in the portfolio of your fund. Your manager sets very high standards and expects a professional report that he can present to the fund’s clients.
Detailed problem description
1- Why might the fund management be interested in diversification into emerging markets? Are they right to recommend such a diversification? Answer these questions citing some empirical evidence.
2- Obtain monthly total return index data for the following 5 equity markets indexes, in US dollar terms, for the 5-year period from October 2016 to September 2020 (the names of the corresponding indices provided in parentheses), plus two financial asset indexes f your choices: (Bonds, Commodities, Derivatives, Cash indexes etc)
US (MSCI USA)
Europe (MSCI EUROPE U$)
Japan (MSCI JAPAN U$)
Pacific, excl. Japan (MSCI PACIFIC EX JP U$)
Latin America (MSCI EM LATIN AMERICA U$)
Index 1
Index 2
Compute monthly returns for each series. Obtain the current US risk-free rate of interest.1 Compute the mean and standard deviation of each series and the variance-covariance matrix. Obtain monthly total return index for the US dollar-based MSCI World equity index (MSCI WORLD U$) and compute its returns.3- In order to estimate expected returns, you decide to use the CAPM. Estimate the beta of the six indices listed above with respect to the MSCI All Country index. Use these estimates of beta in order to compute the CAPM expected return of these 7 indices.
4- Compute the efficient frontier for (i) the first three markets (i.e. US, Europe, Japan) and (ii) all the 7 markets considered. Assume that investors can borrow and lend at the risk free rate of interest and that they are able to take short positions. How does diversification into emerging markets or other assets affect the efficient set?
5- In the light of existing empirical evidence and your own findings, what are your recommendations? Should the fund expand on emerging markets, consider new assets or focus to its current strategy.
6- Suppose that your fund is not allowed to take short positions in any of the markets. How would such a restriction affect the conclusion you have drawn in Questions 4 and 5?
7- Critically reflect on the limitations of your analysis.
You must produce all the spread sheet and graphs in your report.
2000 WORDS:
1. Critically discuss Portfolio Theory and the CAPM. The discussion should include assumptions and shortcomings of the model and possible alternatives. (20 marks)
2. Select a company ensuring it issues Equity, Bonds and Options and that is listed on the FTSE100. Present a short summary of its business, with focus on its financial profitability ratios and strategy for future growth. You could for example show the company’s EPS growth over the last 5 years and compare their EPS and P/E with similar companies or the industry average. Is the company diversified? What are their risk levels as measured by their beta. To gain a good mark in this section you need to read as much as possible about the company, including their latest annual report and any news/reports from reliable sources. Your analysis needs to be from the perspective of an investor. Please include graphs/tables (clearly labelled with data source) as visual aids.
(20 marks)
3. Identify and show the securities issued by the company (equity, bonds, derivatives), show whether bond or equity have been more profitable in the last 6 months and make recommendations as to which securities you would invest in as a Fund Manager for a Mutual Fund based in UK. Clearly explain your choice. Value the option with a Black and Sholes model and compare with the market value
(15 marks)
4. Critically discuss different equity valuation methods and identify the most appropriate method for your chosen company. By collecting relevant financial data from reliable sources (Bloomberg terminals, DataStream, annual reports, FT, etc.) estimate a price for the company’s shares and compare it to the actual market price. Clearly explain any assumptions made when applying your chosen valuation technique. Make sure to include all workings in an Appendix.
(35 marks)
5. Present your report in a suitable format: Include a cover page (with module title and code, assignment title and word count), page numbers, table of content, executive summary, explicit headings. A reference list is optional and only if you reference/quote external sources (e.g. academic/ newspaper articles, textbooks). The report should be clearly written in academic English, the use of any business/scientific jargon clearly explained. Formatting Guidelines: font size 12, text alignment: justify, line spacing: 1.5.
(10 marks for presentation)
Now that you have done the research and made a selection on the stock of a publicly traded U.S. corporation in your first assignment, in Week 4, it’s time to take a closer look at your choice with a detailed analysis. To complete this assignment, refer to the scenario from your first assignment, Investment Selection.
Note: include any financial statements or relevant financial information in an appendix after the “Sources” page in your paper. These links or additional documents are not included in the required page length.
Write a 4–6 page paper in which you do the following:
Provide a detailed overview of the stock of the publicly traded U.S. corporation you selected in the assignment of Week 4.
Provide the rationale for your selection and plans for a diversified portfolio.
Select five financial ratios, then analyze the past three years of financial data for the investment (obtain data from the financial statements or the equivalent).
Analyze the price of the investment to stock market beta for the past five years.
Create a trend line that depicts the price movement for the investment against the market index movement using elements of Microsoft Office, such as Excel, Visio, MS Project, or one of their equivalents (such as Open Project, Dia, and OpenOffice), as appropriate. Note: The graphically depicted solution is not included in the required page length.
Determine the type of investor who would be the best candidate for the chosen investment (e.g., a risk-averse investor, an aggressive investor, a broker, and a dealer in the market). Provide a rationale for why this investment is a solid choice.
Support your assertion that someone with the investor profile you outlined should invest in this stock.
Use at least five quality academic resources in this assignment. Note: Wikipedia and similar websites do not qualify as academic resources. Visit the Strayer University Library.
This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course.
The specific course learning outcome associated with this assignment is:
Propose why an investment is solid and who should invest in it.
s a recently qualified financial advisor, you are helping a client invest her £100,000 inheritance. You plan to divide the client’s capital into 3 parts. The first part consists of only individual stocks. The second part employs only passive strategies by investing in ETFs and tracker funds. In the third part, capital is allocated to derivatives.
Before committing the fund, you decide to backtest the investment thesis and present a portfolio report to the client.
Required:
1. In the first part of the portfolio, choose minimum of 5 stocks. You can consider equity stock in any financial market, and choose any market available in Bloomberg, but you are limited to trade only equity stocks (no ETFs nor index funds) on major exchanges. You need to explain to the client choices of each stock. To convince her that these stocks are good financial bet, your analysis and discussion should include aspects such as: choice of a particular market; its overview and major characteristics; stocks’ valuation expectation of the stocks’ future performance; the criteria used to select stocks; capital allocation of each stock; reasons of allocation etc. Bloomberg equity screening function (EQS) can help with this task.
2. In the second part, choose minimum of 5 ETFs or index funds. Justify your selection, apply the same analysis and rationale as above. But you are limited to trade only ETFs and index funds in this part.
3. In the third part, choose at least 1 option contract. The option can be a hedging position or a purely speculative position or both. If it is used for hedging, demonstrate how the position protect value of the overall portfolio. If the option position is speculative, explain your rationale and justify the investment thesis.
4. Backtest the portfolio using stock prices from 4th October to 6th December 2021, how did the portfolio perform against a chosen benchmark? What is return and risk of the portfolio? Discuss which portfolio performs better during the back testing period, the benchmark or your portfolio? Explain in detail why the portfolio performs better (or worse) than the benchmark. Bloomberg portfolio management function (PORT) can help with this task.
5. As a quality assurance, present a scenario analysis to the client. Hypothetical analysis of the portfolio if a crisis (in scale similar to COVID-19 or the 2008 crisis) strikes. Is your portfolio crisis proof? Why? If not, how can you reduce exposure to a financial crisis. Analysis do not need to be quantitative, discursive discussion is fine.
This is an individual coursework, please complete it on your own. There is no word limit. But there is a page limit of 8 pages.
You are an active fund manager. For each of the recent events given below discuss, whether the event is exploitable by you to create a positive alpha for your portfolio. If the event is exploitable, outline a strategy that you will use to create the positive alpha. For events that are not exploitable, explain why you are unable to create a positive alpha strategy. (5 marks per question) (suggested word limit 2000)
1. Retail traders aggressively buy ‘meme’ stocks targeting stocks short–sold by hedge funds.
2. Major governments in the world provide incentives for the use of hydrogen as a fuel.
3. Major fund management companies increase their allocations to Chinese equities.
4. Trading platforms such as Robinhood impose bans on individual traders trading memestocks.
5. The regulator decides to ban ALL analysts’ reports due to potential conflicts of interest.
6. Cybersecurity breaches become very common.
7. Major central banks permit investors to hold cryptocurrencies.
8. Major central banks of the world exit quantitative easing.
a) For the bond with a coupon of 5.5% paid annually, with 10 years to maturity and a YTM of 6.10%, calculate the duration and modified duration. (3 marks)
b) For the bond described in a) above, calculate the convexity. (3 marks)
c) Calculate the price change for a 50 basis point drop in yield using duration plus convexity. (2 marks)
d) Samantha and Roberta are discussing the riskiness of two treasury bonds A& B with the following features:
Bond Price Modified Duration
A 90 4
B 50 6
Samantha claims that Bond B has more price volatility because of its higher modified duration.
Roberta disagrees and claims that Bond A has more price volatility despite its lower modified duration. Who is right
First, locate the financial statement (10 – K Annual Reporting) information for each company (listed below) that you will be investigating for your final project. This information can be found on each company’s website within the “About U s” section or at the bottom of the homepage under “Investors.”
Research stock and corporate bond holdings for the following companies:
Apple, Inc. (AAPL)
Caterpillar (CAT)
Consolidated Edison (ED)
Northern Trust (NTRS)
Macy’s (M)
Next, address the following:
Calculate the rates of return for each of the securities listed.
Once you have calculated the rates of return for these securities, briefly explain the risk/return relationship for each security.
Refer to the module resources and major indices to support your responses. Be sure to consider the key risk factors investors must observe when making their investments and also the time value of money concept and its relevance in the financial industry.
To complete this assignment, review the Module One Journal Guidelines and Rubric PDF document.
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