Main ComputationExpectedStandardRisk PremiumReturnMonDeviationE(r.docx

Main ComputationExpectedStandardRisk
PremiumReturn/MonDeviationE(ri)siEi=E(ri)-rfRiskfree Rate
(rf)0.23%0%Risky Asset 12.10%13%1.87%Risky Asset
21.30%8%1.07%Correlation (1,2)20%Risk
Aversion2OutputsRisky
AssetCapitalUtilityOptimalProportionOpp
SetAllocationIndifferenceCompletein Risky(x-
axis)CurveLineCurvePortfolioAsset 1
orStandardExpectedExpectedExpectedExpectedOpt
RiskyDeviationRet / MonRet / MonRet / MonRet / MonOpp Set
Curve-500.0%72.7%-2.7%Opp Set Curve-
150.0%25.0%0.1%Opp Set Curve-80.0%16.0%0.7%Opp Set
Curve-70.0%14.8%0.7%Opp Set Curve-60.0%13.6%0.8%Opp
Set Curve-50.0%12.5%0.9%Opp Set Curve-
40.0%11.4%1.0%Opp Set Curve-30.0%10.4%1.1%Opp Set
Curve-20.0%9.4%1.1%Opp Set Curve-10.0%8.6%1.2%Opp Set
Curve0.0%8.0%1.3%Opp Set Curve10.0%7.6%1.4%Opp Set
Curve100.0%13.0%2.1%Opp Set Curve110.0%14.2%2.2%Opp
Set Curve120.0%15.4%2.3%Opp Set
Curve250.0%32.3%3.3%Opp Set Curve750.0%100.9%7.3%Opt
Risky Port40.7%7.8%1.6%Cap Alloc Line0.0%0.0%0.2%Cap
Alloc Line1000.0%77.8%14.2%Indifference
Curve0.0%0.63%Indifference Curve1.0%0.65%Indifference
Curve14.0%4.55%Indifference Curve15.0%5.13%Opt Comp

Port4.5%1.0%Constant Utility Value0.0063Risk aversionWeight
TPWeight RFExp. ReturnStd.
dev.Utility2.00.57630.42370.01030.04480.0063
Sheet1Risky Asset 1Risky Asset 2MonthBarrickIBMTreasury
BillsDec 2009-7.75%3.60%1.137860.158Nov
200919.37%5.22%1.202270.148Oct 2009-
5.20%0.84%1.282780.148Sep
20099.22%1.32%1.121760.178Aug 2009-
0.57%0.57%0.944640.178Jul
20094.02%12.94%0.971480.202Jun 2009-11.90%-
1.75%1.073460.311May 200931.55%3.51%1.014420.316Apr
2009-10.24%6.52%0.976160.38Mar
20097.35%5.28%0.993190.602Feb 2009-
19.45%0.96%0.936430.587Jan
20091.96%8.90%1.03660.612Dec
200824.81%3.14%0.944450.671Nov 200830.43%-
11.69%0.898390.706Oct 2008-38.11%-20.51%1.013560.706Sep
20085.79%-3.92%0.950210.805Aug 2008-17.99%-
4.49%0.921410.795Jul 2008-6.92%7.97%0.852310.735Jun
200812.93%-8.42%0.722740.665May
20084.84%7.65%0.573010.575Apr 2008-
11.12%4.83%0.48950.525Mar 2008-
16.36%1.12%0.564360.565Feb
20080.99%6.68%0.498140.465Jan 200822.33%-
0.92%0.483750.44Dec 20073.80%2.78%0.604680.53Nov 2007-
7.86%-9.08%0.719860.475Oct 20079.56%-
1.43%0.662270.39Sep 200723.86%0.95%0.581650.34Aug 2007-
1.16%5.82%0.547090.28Jul 200713.18%5.13%0.613320.345Jun
2007-0.21%-1.27%0.570130.31May
20074.16%4.69%0.619080.3Apr 2007-
1.54%8.43%0.702580.35Mar 2007-4.42%1.42%0.642110.36Feb
20070.84%-5.96%0.613320.425Jan 2007-
3.52%2.06%0.656510.435Dec 2006-2.35%5.69%0.68530.51Nov
20061.77%-0.12%0.650750.435Oct
20060.91%12.68%0.665150.405Sep 2006-
8.24%1.20%0.549970.44Aug 20068.70%4.99%0.561490.46Jul

20064.05%0.77%0.538450.435Jun 2006-3.30%-
3.85%0.498140.445May 20060.79%-2.60%0.477990.405Apr
200611.89%-0.16%0.659390.415Mar 2006-
0.48%2.78%0.771690.435Feb 2006-13.00%-
1.06%0.757290.44Jan 200612.88%-1.09%0.791840.425Dec
20054.74%-7.54%0.555730.64Nov
20055.82%8.82%0.618950.69Oct 2005-
13.08%2.07%0.633480.605Sep 200510.79%-
0.50%0.610240.48Aug 20057.02%-3.16%0.630580.555Jul 2005-
2.12%12.48%0.645110.485Jun 20058.87%-
1.79%0.682880.51May 20053.49%-0.82%0.650920.54Apr 2005-
6.84%-16.42%0.569550.575Mar 2005-3.78%-
1.30%0.473660.58Feb 200513.91%-0.71%0.386480.505Jan
2005-9.74%-5.23%0.317320.48Dec 2004-
1.50%4.61%0.317320.48Nov 20049.73%5.20%Oct
20046.99%4.68%Sep 20045.20%1.24%Aug 20044.60%-
2.53%Jul 2004-3.19%-1.23%Jun 2004-4.45%-0.50%May
20048.06%0.68%Apr 2004-19.13%-4.00%Mar 200416.28%-
4.83%Feb 20043.81%-2.59%Jan 2004-13.25%7.07%Dec
20031.66%2.36%Nov 200315.31%1.36%Oct
20033.40%1.30%Sep 2003-6.83%7.71%Aug
200318.05%1.13%Jul 2003-4.36%-1.52%Jun 20032.40%-
6.29%May 200317.66%3.89%Apr 2003-3.92%8.25%Mar 2003-
3.47%0.62%Feb 2003-2.01%-0.13%Jan 20036.75%0.90%Dec
20025.79%-10.84%Nov 2002-2.65%10.30%Oct 2002-
3.09%35.38%Sep 2002-3.24%-22.65%Aug 20024.90%7.29%Jul
2002-19.33%-2.22%Jun 2002-12.89%-10.50%May 20029.17%-
3.77%Apr 20028.14%-19.46%Mar 20022.83%5.99%Feb
20025.56%-8.93%Jan 20027.21%-10.81%Dec
20015.42%4.65%Nov 2001-2.25%7.09%Oct 2001-
10.14%17.83%Sep 20018.30%-8.23%Aug 20017.59%-4.87%Jul
2001-1.72%-6.89%Jun 2001-8.18%1.07%May 20011.03%-
2.78%Apr 200115.05%19.71%Mar 2001-11.79%-3.72%Feb
20014.72%-10.69%Jan 2001-5.56%31.76%Dec 20009.20%-
9.09%Nov 200012.97%-4.94%Oct 2000-12.30%-12.44%Sep
2000-4.31%-14.77%Aug 20000.00%17.51%Jul 2000-

12.37%2.62%Jun 20000.34%2.04%May 20008.46%-3.58%Apr
20007.17%-5.51%Mar 2000-3.83%14.84%Feb 2000-0.38%-
8.36%Jan 2000-7.42%4.06%Average ReturnStandard Deviation
Chart 1
Risky Opportunity Set, Capital Allocation Line, and
Indifference Curve
Risk Free
0 2.3E-3 Risky Asset 1
0.13 2.1000000000000001E-2 Risky Asset 2
0.08 1.2999999999999999E-2 Complete Portfolio
4.4841306731903098E-2 1.0342971157698472E-2 Optimum
Portfolio
7.7808710077419324E-2 1.6256176939981118E-2 Portfolio
Frontier 0.72670489196096655 0.24984995497297974
0.15987995496621835 0.14773828210724529
0.13592056503708333 0.12451907484397723
0.11365913953571882 0.10351135203445079
9.4305885288246918E-2 8.6344658201882932E-2
7.9999999999999946E-2 7.5679587736720635E-2
7.3740084079149254E-2 7.4368003872633287E-2
7.7500967735893461E-2 8.2855295545909438E-2
9.0035548535009224E-2 9.8643803657401621E-2
0.10834020491027328 0.11885873968707561 0.13
0.14161708936424308 0.15360208331920502
0.3231485726411305 1.0090713552569015 -
2.700000000000001E-2 1.0000000000000009E-3
6.5999999999999982E-3 7.3999999999999986E-3
8.199999999999999E-3 8.9999999999999993E-3
9.7999999999999962E-3 1.0599999999999998E-2
1.1400000000000007E-2 1.2200000000000009E-2

1.3000000000000008E-2 1.3800000000000007E-2 1.46E-2
1.5399999999999999E-2 1.6199999999999999E-2
1.7000000000000001E-2 1.78E-2
1.8599999999999998E-2 1.9400000000000001E-2
2.0199999999999999E-2 2.1000000000000001E-2 2.18E-2
2.2600000000000002E-2 3.3000000000000002E-2
7.3000000000000009E-2 CML0 0.77808710077419319
2.3E-3 0.14186176939981118 Indifference Curve 0
0.01 0.02 0.03 0.04 0.05 0.06 7.0000000000000007E-2
0.08 0.09 0.1 0.11 0.12 0.13 0.14000000000000001
0.15 6.3214855788492359E-3 6.5214855788492355E-3
7.1214855788492362E-3 8.1214855788492354E-3
9.5214855788492356E-3 1.1321485578849237E-2
1.3521485578849236E-2 1.6121485578849237E-2
1.9121485578849236E-2 2.2521485578849233E-2
2.6321485578849238E-2 3.0521485578849233E-2
3.5121485578849233E-2 4.0121485578849238E-2
4.552148557884924E-2 5.1321485578849232E-2 The
Risky Asset 1 and 2
0 0.13 0.08 2.3E-3 2.1000000000000001E-2
1.2999999999999999E-2
Standard Deviation (s)
Expected Return / Month
(1)

BUS329 (Investment Analysis)
Assignment: How to download data from Yahoo Finance
This guidelines show you how to download stock price data
from Yahoo Finance. The first
part is related to data you need to construct optimal complete
portfolio and the second
part is related to data you need to calculate systematic risks.
First part: Constructing optimal complete portfolio
(1) This part of the assignment is about constructing optimal
complete portfolio with
two risky assets and one risk-free asset.
(2) For risk-free rate use 1 month Bank Accepted Bill (BAB)
rate available on Reserve
Bank of Australia (RBA) website as follow:
(http://www.rba.gov.au/statistics/tables/#interest-rates) (Take
the average of BAB rate
during your sample period). You will need to click “Interest
Rates and Yield –
Money Market – Monthly – F1.1” to get this data. After clicking
an excel file will be

downloaded, where you will find 1-moth BAB rate.
(3) For risky assets choose two stocks from Australia Stock
Exchange (ASX)
(4) Download stock price data from Yahoo Finance for free
(website:
https://au.finance.yahoo.com/q/hp?s=ASX.AX)
(5) How to download data from Yahoo Finance website:
You need to enter stock symbol here to download the price of
your selected stock.
(6) Stock symbols are available in ASX website
(http://www.asx.com.au/asx/research/listedCompanies.do).
Clicking this link will
give you the following web page:
http://www.rba.gov.au/statistics/tables/#interest-rates
https://au.finance.yahoo.com/q/hp?s=ASX.AX
http://www.asx.com.au/asx/research/listedCompanies.do
(2)

(7) You need to use these ASX codes (this is what we call
symbol above) to download
stock price. For example, suppose you want to download stock
price of ABACUS
PROPERTY GROUP. Code for this stock is ABP. So you type
ABP in the box and click
„Look Up‟ as follows:
(8) This will return the following page:
(9) Now click „Historical Prices‟. This will return the following
page:
(3)
(10) Now select your start and end date here. Download
monthly data by clicking
„Monthly‟. I strongly recommend using monthly data to avoid
the complexities of
handling public holidays, non-trading day etc. Once you have
selected start and
end date and checked „Monthly‟, click „Get Prices‟ to
download the data. When

data download is complete, go to the bottom of the page and
click „Download to
SpreadSheet‟ to get data in CSV format. Finally save the data
as per your
convenience. For analysis purpose use the stock price along the
„Adj Close‟ column
(11) Repeat the same process to download your second stock
price data.
(12) Use monthly data from July 2008 to December 2016.
(13) Next you will need to calculate stock return from stock
prices. Use the
following formula to calculate the return series:
(4)
100
1

t
tt
t
P
PP
r (1)
For example, in the screenshot below „Adj Close‟ price on 1
June 2016 is AU$3.07 and that
on 1 July 2016 is AU$3.10. Therefore return on 1 July 2016 is
calculated as follows:
%98.0
100
07.3$
07.3$10.3$
20161

AU
AUAU
r
July
Using stock price data the return series can easily be generated
in excel.
(14) If the data are downloaded from ‘New’ to ‘Old’, then you
need to convert them from ‘Old’ to
‘New’. For example, in the screenshot above 1 July, 2016 data
come first and then 1 June
2016 – this is ‘New’ to ‘Old’ pattern. You will need to convert
them to ‘Old’ to ‘New’ form.
This can easily be done by using ‘Sort’ under ‘Data’ in Excel
(15) For your analysis you will need to calculate variance,
covariance, standard
deviation etc. for the stock return series. You can calculate
these by using

formulas in excel. Please visit the following YouTube website
to see how excel can
be used to calculate those statistics:
https://www.youtube.com/results?search_query=how+to+calcula
te+variance%2C+covarian
ce+in+excel
(16) Calculate optimum weights of two risky assets (say, asset S
and Asset B) by
using the following formula [this is similar to the formula given
in Equation 7.13
(page 217) of your text]
te+variance%2C+covariance+in+excel
te+variance%2C+covariance+in+excel
(5)
Use average of stock returns calculated using formula (1) above
as a proxy for expected
return, E(r), in the above equation. Similarly use the average of
risk-free rate as a proxy

for rf in the above equation.
(17) You will also be required a value for risk aversion
coefficient, A. It is not
available anywhere. It is a subjective value. Use any one of the
following three risk
aversion coefficients:
(a) Highly risk-averse investor: if you think you are highly risk
averse, then use 5 as
your risk-aversion coefficient (i.e., A = 5)
(b) Moderate risk-averse investor: if you think you are
moderately risk averse, then use
4 as your risk-aversion coefficient (i.e., A = 4)
(c) Low risk-averse investor: if you think you are low risk-
averse investor, then use 3 as
your risk-aversion coefficient (i.e., A = 3)
(18) Split the whole sample into two sub-periods:
(a) From July 2008 to December 2011 (this period is a proxy for
Global Financial
Crisis (GFC).
(b) From January 2012 to December 2016 (this period is a proxy
for post Global
Financial Crisis (post-GFC).

(6)
Second part: Systematic risk of the risky assets
(1) In this part of the assignment you will be required to
calculate the systematic risk
of the risky assets, that is, two stocks used in Part A of the
assignment. In other
words, you are required to calculate β (beta) of each stock.
(2) Split the whole sample into two sub-periods:
(3) From July 2008 to December 2011 (this period is a proxy for
Global Financial Crisis
(GFC) and hence is expected to capture the effect of GFC on
stocks‟ systematic
risk)
(4) From January 2012 to December 2016 (this period is a proxy
for post Global
Fnancial Crisis (post-GFC) and hence is expected to capture the
stocks‟ systematic

risk during post-GFC period)
(5) You can calculate beta by using the following formula:
M
Mi
i
rVar
rrCov ,
here rM is return on market portfolio. You can use ASX All
Ordinary index as a proxy
for market portfolio.
(6) To download ASX All Ordinary index data type „^AORD‟
in the box as below:
(7) Now click „Look Up‟, which will return the following page.
(7)

(8) Now click „Historical Prices‟ and download ASX All
Ordinary index following steps
described in above.
(9) Calculate ASX All Ordinary index return using formula
given in eq (1) above.
(10) Calculate covariance between stock return and index return
(you will need
to calculate two co-variances for two stock returns.
(11) Calculate variance of index return
(12) Finally calculate beta using formula in equation (2) above.
(13) Compare the betas (GFC beta vs post-GFC beta)
Important Note: This is a group assignment. Each group will
work on two firms‟ stock price
data; however, each group has to work on different pair of
firms‟ stock prices. For
example, if Group 1 is works on Firm A and Firm B, no other
group can work on Firm A and
Firm B data; another group can work on Firm A and Firm C data
or Firm B and Firm C data.

Remember exactly same two forms‟ data cannot be used by
multiple groups. If two groups
work on exactly same two firms’ data, they will arrive at
exactly same result, which
will be treated as serious type of plagiarism. So using exactly
same two firms‟ data by
more than one group is strictly prohibited.

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