This datasheet contains information on Excess return on market portfolio and Excess return on two financial portfolios.
The Capital Asset Pricing Model (CAPM) is an important model in the field of finance. It explains variation in the rate of return on a financial portfolio as a function of the rate of return on a portfolio consisting of all publicly traded stocks, which is called the market portfolio.
The CAPM says that the risk premium on a financial portfolio is proportional to the risk premium on the market portfolio. This is described by the population model, as shown by the equation below:
ri – rf = β0 β1(rm – rf) ε
where:
ri is the return on the financial portfolio
rf is the risk free return
rm is the return on the market portfolio
ri – rf = excess returns on a financial portfolio
rm – rf = excess returns on market portfolio.
ε = Random error term (includes all the variations that are not explained by the model)
β1, is called the beta risk of the portfolio. It measures the risk associated with the market. If β1 1, a given financial portfolio is more risky than the market portfolio.
β0 represents abnormal returns of the financial portfolio. According to the CAPM model no financial portfolio outperforms the market. Therefore, we expect β0 = 0. If β0 0, then the financial portfolio outperforms the market portfolio.
a) Draw a scatter plot of the excess return on Financial Portfolio 1 and the excess returns on the market portfolio. (Hint: Label the scatterplot appropriately and include the title)
b) Based on the scatterplot, comment on the relationship between the two variables. Word Count: strictly not more than 100 words.
c) You are required to provide a brief report on the relationship between the excess return on Financial Portfolio 1 and the excess return on the Market portfolio. Use ALL relevant simple linear regression tools (other than scatter plot) which you have learned in the Week 9 Lecture (Tutorial 10). Do the results support your answer in (b)? What investment recommendation would you provide to your client?
Background Information
Refer to the worksheet labelled “Financial Assets” in the excel file Assignment 2 Data.xlsx to answer Questions
The worksheet contains information on weekly returns of 4 financial assets from September 2004 to November 2021. The assets we refer to are Gold, Apple, Nasdaq and Nike. Note: We compare the performance of the different assets using cross-sectional analysis.
The data set contains different variables and they are described below:
Date – Date/Month/Year
Gold – Weekly return on Gold (%)
Apple – Weekly return on Apple (%)
Nasdaq – Weekly return on Nasdaq (%)
Nike – Weekly return on Nike (%)
Positive returns reflect a price increase while negative returns reflect a price decrease of the asset.
As a financial advisor, you are required to complete the following tasks to provide advice to your client who wishes to make an investment. Major factors considered when deciding on investments are risk/market uncertainty and reward/return.
The questions here cover three broad areas of data analysis:
1) Understanding your data and preliminary analysis
2) Inferential statistics
3) Application and solving problem
We are interested in estimating the weekly returns of Nasdaq and Nike.
The fluctuations of prices can be divided into “Rise” and “Fall”. “Rise” refers to a positive return and “Fall” refers to a negative return. Generate two new variables called “Nasdaq Fluctuation” and “Nike Fluctuation” to reflect this information.
a) Generate a pivot table of counts/frequencies for the two variables “Nasdaq Fluctuation” and “Nike Fluctuation”.
b) What is the likelihood that the price of Nasdaq and Nike will rise? Show the probability statement and working. State your answer as a percentage using 2 decimal places.
c) What is the likelihood that the price of at least one asset rises? Show the probability statement and working.
d) The investor is interested to know if Nasdaq and Nike asset prices are dependent in terms of their rise and fall.
(i) How would you determine this using general probability concepts learned from Lecture 3? Show your working.
(ii) Perform an appropriate hypothesis test at the 5% level of significance. Show all steps and all working.
(iii) Are the two answers above consistent. Explain briefly.
Background Information
Refer to the worksheet labelled “Financial Assets” in the excel file Assignment 2 Data.xlsx to answer Question.
The worksheet contains information on weekly returns of 4 financial assets from September 2004 to November 2021. The assets we refer to are Gold, Apple, Nasdaq and Nike. Note: We compare the performance of the different assets using cross-sectional analysis.
The data set contains different variables and they are described below:
Date – Date/Month/Year
Gold – Weekly return on Gold (%)
Apple – Weekly return on Apple (%)
Nasdaq – Weekly return on Nasdaq (%)
Nike – Weekly return on Nike (%)
Positive returns reflect a price increase while negative returns reflect a price decrease of the asset.
As a financial advisor, you are required to complete the following tasks to provide advice to your client who wishes to make an investment. Major factors considered when deciding on investments are risk/market uncertainty and reward/return.
The questions here cover three broad areas of data analysis:
1) Understanding your data and preliminary analysis
2) Inferential statistics
3) Application and solving problems
We are interested in estimating the weekly returns of Nasdaq and Nike.
Statistics Assignment Help 1?Obtain the 95% confidence interval for the average returns of Nasdaq and Nike over this period. Use 4 decimal places in your calculations and state your final answer to 2 decimal places. (Hint: You are not required to state the unit (%) as it is also stated in the answer)
Confidence Interval for average returns of Nasdaq:
Lower Limit: Answer%
Upper Limit: Answer%
Confidence Interval for average returns of Nike:
Lower Limit: Answer%
Upper Limit: Answer%
2?How would you advise your client based on your findings in Question 2? Why?
Word Count: strictly not more than 100 words
Background Information
Refer to the worksheet labelled “Financial Assets” in the excel file Assignment 2 Data.xlsx to answer Questions .
The worksheet contains information on weekly returns of 4 financial assets from September 2004 to November 2021. The assets we refer to are Gold, Apple, Nasdaq and Nike. Note: We compare the performance of the different assets using cross-sectional analysis.
The data set contains different variables and they are described below:
Date – Date/Month/Year
Gold – Weekly return on Gold (%)
Apple – Weekly return on Apple (%)
Nasdaq – Weekly return on Nasdaq (%)
Nike – Weekly return on Nike (%)
Positive returns reflect a price increase while negative returns reflect a price decrease of the asset.
As a financial advisor, you are required to complete the following tasks to provide advice to your client who wishes to make an investment. Major factors considered when deciding on investments are risk/market uncertainty and reward/return.
The questions here cover three broad areas of data analysis:
1) Understanding your data and preliminary analysis
2) Inferential statistics
3) Application and solving problems
We are interested in comparing weekly returns of Nasdaq and Nike.
a) Construct two well labelled histograms of weekly returns of Nasdaq and Nike. (Hint: In the histogram, group the returns into 10 intervals).
b) Provide Summary Statistics of weekly returns of Nasdaq and Nike by completing the table below. State your answers to 2 decimal places.
c) Which asset has the highest expected value of returns between Nasdaq and Nike? Provide evidence to support your answer.
d) Based on the evidence from (a) – (c), use measures of central tendency, variability and shape to do a comparison of the distributions of weekly returns for Nasdaq and Nike? Based on your comparison, what are the implications on the investment? (Hint: Wherever possible provide contextual interpretation of all measures discussed)
Background Information
Refer to the worksheet labelled “Financial Assets” in the excel file Assignment 2 Data.xlsx to answer Questions.
The worksheet contains information on weekly returns of 4 financial assets from September 2004 to November 2021. The assets we refer to are Gold, Apple, Nasdaq and Nike. Note: We compare the performance of the different assets using cross-sectional analysis.
The data set contains different variables and they are described below:
Date – Date/Month/Year
Gold – Weekly return on Gold (%)
Apple – Weekly return on Apple (%)
Nasdaq – Weekly return on Nasdaq (%)
Nike – Weekly return on Nike (%)
Positive returns reflect a price increase while negative returns reflect a price decrease of the asset.
As a financial advisor, you are required to complete the following tasks to provide advice to your client who wishes to make an investment. Major factors considered when deciding on investments are risk/market uncertainty and reward/return.
The questions here cover three broad areas of data analysis:
1) Understanding your data and preliminary analysis
2) Inferential statistics
3) Application and solving problems