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- 2. Capital Market Expectation and Beta (β) Submitted To: Mr. Anwar Zahid Lecturer Department of Finance Independent University, Bangladesh
- 3. Submitted By Group Name: Random Md. Imtiazur Rahman Munshi- 1610422 Md. Monirujjaman- 1620575 MD. Shadman Shakib Shawon-1620032
- 4. JPMorgan Chase & Co (JPM) • Boasting some $2.5 trillion in assets. • Around 5,250 branches in about two dozen states. • Four segments: • Consumer & Community Banking, • Corporate & Investment Bank, • Commercial Banking, and Asset & Wealth Management. 4
- 5. Facebook Inc. • Generates about 55% of its revenue from outside of the US. • Revenue has grown from nearly $8 billion to more than $40 billion since 2013. • Net income has grown from $1.5 billion to $16 billion. 5
- 6. New York Stock Exchange – NYSE • Largest marketplaces for securities and other exchange-traded investments. • Average Market Capital of NYSE stands at US $28.5 trillion. • The number of companies listed with this exchange is 2773. 6
- 7. FR Individual Stock Company Expected Return Variance Standard Deviation Facebook (A) 3.32% 0.0083 0.0910 JP Morgan Chase & Co. 1.78% 0.0033 0.0572 NYK 0.69% 0.0007 0.0271 7 Expected Return, risk, variance of individual stock
- 8. FR Efficient / Opportunity Set For Portfolio X(A) X(B) Variance Portfolio Risk Portfolio Return 0% 100% 0.003273 5.721% 1.78% 10% 90% 0.002728 5.223% 1.93% 20% 80% 0.002416 4.916% 2.09% 30% 70% 0.002337 4.834% 2.24% 40% 60% 0.002489 4.989% 2.40% 50% 50% 0.002874 5.361% 2.55% 60% 40% 0.003492 5.909% 2.71% 0% 0% 0 0.000% 0.00% 70% 30% 0.004341 6.589% 2.86% 80% 20% 0.005423 7.364% 3.01% 90% 10% 0.006738 8.208% 3.17% 100% 0% 0.008284 9.102% 3.32% 8
- 9. 9 Efficient Frontier 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% PortfolioReturn Portfolio Risk Efficient Frontier 5.72% 5.22% 4.92% 4.83% 4.99% 5.36% 5.91% 0.00% 6.59% 7.36% 8.21% 9.10%
- 10. Minimum Variance Portfolio • Minimum Variance Portfolio consists of 30% Facebook and 70% JPMorgan Chase. • lowest variance of 0.002337 which is marked by the point MV in the graph above. • Expected return is 2.24% and the Standard Deviation is 4.834%. 10
- 11. FR Covariance Covariance Amount FB(A) &JPM(B) -0.000508159 FB(A) & NYK 0.000582706 JPM(B) & NYK 0.00084243 11
- 12. FR Correlation Covariance Amount FB(A) &JPM(B) -0.099276468 FB(A) & NYK 0.240157649 JPM(B) & NYK 0.55240622 12
- 13. FR Individual Stocks, Beta & Portfolio Beta Beta (Individual Stock) Beta(PORTFOLIO) FB(A) =0.792409926 1.03929932 JPM(B) =1.145603485 NYK(Market) =1 13
- 14. FR CAPM (Capital Asset Pricing Model) If Rf 0.50% Market Return 0.69% Beta FB 0.792409926 Beta JPM 1.145603485 Expected Return for FB 0.65% Expected Return for JPM 0.72% 14
- 15. FR 15 0.65% 0.72% 0.64% 0.65% 0.66% 0.67% 0.68% 0.69% 0.70% 0.71% 0.72% 0.73% 0 0.2 0.4 0.6 0.8 1 1.2 1.4 Return Beta Beta & Expected Return Return Beta & Expected Return
- 16. Thank You.