Need to calculate beta from Excel.Need to use Capital Asset Pricing Model (CAPM).Need to calculate the rate of return.Need use Efficient Market Hypothesis and momentum effect theory.Read document please！
data123.xls
assessment_brief.docx
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Date
9/30/2014
10/31/2014
11/28/2014
12/31/2014
1/30/2015
2/27/2015
3/31/2015
4/30/2015
5/29/2015
6/30/2015
7/31/2015
8/31/2015
9/30/2015
10/30/2015
11/30/2015
12/31/2015
1/29/2016
2/29/2016
3/31/2016
4/29/2016
5/31/2016
6/30/2016
7/29/2016
8/31/2016
9/30/2016
10/31/2016
11/30/2016
12/30/2016
1/31/2017
2/28/2017
3/31/2017
4/28/2017
5/31/2017
6/30/2017
7/31/2017
8/31/2017
9/29/2017
10/31/2017
11/30/2017
12/29/2017
1/31/2018
2/28/2018
3/30/2018
4/30/2018
5/31/2018
6/29/2018
FTSE100
6629.07
6563.212
6766.645
6613.382
6804.518
7031.685
6894.314
7108.217
7160.239
6701.723
6886.518
6476.662
6289.907
6615.289
6637.748
6524.247
6362.111
6415.49
6531.405
6624.388
6645.961
6959.269
7198.505
7318.948
7450.792
7527.706
7377.522
7773.836
7729.596
7969.881
8059.189
7952.162
8342.94
8137.891
8207.838
8343.347
8285.978
8436.39
8286.343
8703.014
8532.489
8243.824
8076.663
8624.967
8865.81
8844.762
JD Sport
83.462
89.941
97.956
98.967
98.09
95.652
93.507
112.033
127.146
139.038
158.311
172.274
187.81
189.875
190.858
204.973
225.253
225.647
221.709
245.928
258.726
228.087
248.858
255.584
292.181
300.489
329.371
314.672
343.773
348.228
381.387
440.481
446.519
347.533
355.377
321.815
371.86
355.079
327.733
334.093
363.905
380.898
333.198
388.549
378.314
439.222
Tesco
Burberry
178.018
1336.062
167.09
1353.746
179.458
1458.969
181.913
1455.118
216.322
1537.836
236.198
1665.025
232.781
1541.394
212.713
1551.178
204.628
1507.595
204.579
1397.305
207.611
1454.414
184.174
1275.437
176.33
1236.569
176.426
1200.412
160.93
1125.386
143.894
1089.365
166.898
1089.365
173.635
1203.316
184.608
1244.338
165.646
1083.896
158.909
979.061
168.341
1057.459
150.15
1231.55
160.112
1216.622
176.089
1286.596
202.847
1376.163
200.874
1333.246
199.093
1406.73
187.303
1541.107
181.335
1621.922
178.64
1620.042
176.378
1516.675
176.811
1705.555
162.47
1560.841
167.668
1636.16
174.116
1718.398
180.132
1683.016
175.535
1818.805
187.776
1640.941
202.485
1724.4
202.243
1519.435
203.985
1475.652
199.243
1632.022
228.273
1754.712
239.7
1990.951
250.432
2108.3
7/31/2018
8/31/2018
9/28/2018
10/31/2018
11/30/2018
12/31/2018
1/31/2019
2/28/2019
3/29/2019
4/30/2019
5/31/2019
6/28/2019
7/31/2019
8/30/2019
8978.801
8684.228
8783.241
8357.462
8225.362
7938.984
8227.481
8416.62
8693.497
8891.646
8637.683
8978.659
9179.036
8805.584
466.437
506.412
457.665
407.023
394.032
347.945
461.666
464.559
501.368
627.858
615.288
586.4
649.8
617
253.944
240.481
233.945
209.711
194.226
186.902
219.347
222.198
228.195
245.597
226.4
226.7
223.3
219.2
2056.568
2182.481
1966.77
1767.653
1733.979
1704.788
1769.62
1856.062
1919.912
1981.306
1665.004
1862
2259
2164
Monthly returns
August
September
HSBA LN Equity
BATS LN Equity
GSK LN Equity
RDSA LN Equity
BP/ LN Equity
RDSB LN Equity
AZN LN Equity
-0.790% -1.166% -2.552% -0.311% -0.578% -0.348% -1.679%
0.674% -1.292% -1.140% -1.626%
0.099% -1.894% -2.056%
VOD LN Equity
DGE LN Equity
RB/ LN Equity
SHP LN Equity
ULVR LN Equity
SAB LN Equity
NG/ LN Equity
IMB LN Equity
PRU LN Equity
-1.951% -0.417% -1.321% -1.670% -0.966% -0.365% -1.980% -1.048% -4.155%
-0.859% -1.252%
0.131% -4.382% -1.056%
0.274% -0.569% -1.321% -1.225%
LLOY LN Equity
BT/A LN Equity
RIO LN Equity
BARC LN Equity
CPG LN Equity
ARM LN Equity
WPP LN Equity
GLEN LN Equity
BLT LN Equity
1.315% -1.360%
0.379% -1.968% -0.803%
0.059% -1.352% -2.445%
0.945%
4.889%
0.840%
0.731%
3.462% -2.947% -0.059%
2.010% -2.079%
2.371%
CRH LN Equity
STAN LN Equity
AV/ LN Equity
BA/ LN Equity
REL LN Equity
SSE LN Equity
EXPN LN Equity
RR/ LN Equity
TSCO LN Equity
0.991% -4.932% -1.343% -0.875% -1.170% -2.208% -2.353% -0.514%
0.862%
1.269% -0.320%
1.006%
2.145% -0.626% -0.068%
1.055% -0.987%
2.604%
LGEN LN Equity
CNA LN Equity
SN/ LN Equity
AAL LN Equity
WOS LN Equity
OML LN Equity
ABF LN Equity
SKY LN Equity
LSE LN Equity
-2.678%
0.513% -3.482% -0.387% -1.205% -4.739% -0.605% -2.648%
0.546%
0.655% -0.513% -2.478% -1.598%
1.026% -4.541% -0.983%
2.159% -3.386%
LAND LN Equity
KGF LN Equity
BNZL LN Equity
PPB LN Equity
SGE LN Equity
RRS LN Equity
NXT LN Equity
ITV LN Equity
WTB LN Equity
-1.925%
1.102% -1.326%
0.846% -0.618% -2.482% -0.844% -1.826%
0.449%
0.802%
0.697%
0.651% -2.579% -0.968% -8.291%
1.431%
3.128%
2.949%
PSON LN Equity
SL/ LN Equity
IAG LN Equity
UU/ LN Equity
BLND LN Equity
CPI LN Equity
CCL LN Equity
IHG LN Equity
JMAT LN Equity
-1.341% -1.040% -4.503% -1.653% -2.421%
0.195% -0.639%
0.551% -0.717%
-0.120%
0.180%
1.790% -0.522%
1.675%
3.380%
0.963% -1.945% -1.025%
RBS LN Equity
AHT LN Equity
DCC LN Equity
III LN EquityBRBY LN Equity
MNDI LN Equity
ITRK LN Equity
SVT LN Equity
MKS LN Equity
-2.918% -3.156%
1.834% -1.749% -0.225% -1.478% -0.992% -1.761% -3.270%
4.796%
4.024% -2.045% -1.535% -3.059%
1.054% -2.026%
0.033%
2.156%
SMIN LN Equity
PSN LN Equity
GKN LN Equity
RSA LN Equity
DLG LN Equity
BAB LN Equity
STJ LN Equity
TW/ LN Equity
TUI LN Equity
-0.376%
0.836%
0.448% -2.042% -2.755%
0.872% -2.892%
0.057% -0.196%
-1.112%
7.559% -0.102% -1.193% -0.530%
0.288%
0.985%
7.252%
0.941%
RMG LN Equity
INF LN Equity
ADM LN Equity
HMSO LN Equity
MDC LN Equity
BDEV LN Equity
PFG LN Equity
MRW LN Equity
WPG LN Equity
-0.106%
0.129% -6.096% -0.099% -1.986%
3.149%
0.969%
2.098% -2.731%
0.861% -0.564% -4.062%
2.156% -5.303% 10.519%
5.034%
1.634% -0.355%
TPK LN Equity
DC/ LN Equity
MERL LN Equity
CCH LN Equity
FRES LN Equity
SBRY LN Equity
HIK LN Equity
BKG LN Equity
SDR LN Equity
1.078%
0.443%
1.136% -1.107% -2.260%
2.975% -1.630% -0.245% -1.593%
9.032%
2.198% -0.904% -0.706% -7.960% -0.260% -4.723%
6.796%
0.873%
HL/ LN Equity
INTU LN Equity
EZJ LN Equity
ANTO LN Equity
-1.155% -0.749%
1.542%
9.274%
0.222%
1.658% -0.376%
4.263%
Assessment Brief
Financial Analysis and Investment
Question 1:
a) The Excel file Assignment data on Blackboard provides the adjusted closing price
of three stocks: JD Sports Fashion PLC, Tesco PLC and Burberry Group PLC; and the
market index (FTSE100). Estimate the beta of the three stocks. Comment on the
riskiness of these stocks with regards to Capital Asset Pricing Model (CAPM).
(25 points)
b) According to Roll (1977), “inefficient market proxies” is one of the drawbacks of
CAPM. Briefly discuss his critique (maximum 300 words).
(25 points).
Question 2:
Assume that you were an investor who follows a one-month momentum strategy. You
observe the performance of all stocks in the FTSE100 index. At the beginning of each
month, you calculate the returns of all stocks in the previous month (the ranking period)
and rank them to form the “winner” and “loser” portfolios.
The winner portfolio is constructed as the equally weighted portfolio of the top 5 stocks
with the best performance. The loser portfolio is constructed as the equally weighted
portfolio of the bottom 5 stocks with the worst performance.
The Assignment Data on Blackboard provides the return data of all stocks in FTSE100
in August and September (list of components obtained at the beginning of September).
a) – List the constituents of the winner portfolio and loser portfolio based on the
returns in August.
– The manager will buy and hold the winner portfolio and short sell the loser
portfolio at the beginning of September. Assume that there is no transaction cost.
What is the return of the strategy at the end of September?
– Briefly explain whether there is a momentum effect in this case.
(25 points).
b) Briefly discuss the implication of momentum effect on market efficiency
according to Efficient Market Hypothesis (EMH) (maximum 300
words).
(25 points)
Note: You do not need to submit your Excel file. Only summary tables are needed.
Advice and Guidance:
1. In section a, to estimate beta, you can:
– use the equation:
OR
–
use the market model. Specifically, regress stock returns ( ) against market
returns ( )
In section b, you should explain Roll’s critique.
2. Section a asks you to follow a momentum strategy and evaluate your investment outcome.
For section b, you should briefly explain EMH and momentum effect, and whether the
market is efficient if the momentum effect presents and why.
IMPORTANT: Pay close attention to the School’s Policy on Plagiarism. Copying the
texts into your answer is not acceptable, even when you cite the sources. You must use
your own words.
Mark
85-100%
Postgraduate Grade Descriptor
70-84%
Scholarship: Very good application of a rigorous and extensive knowledge of subject matter; demonstrates a critical
appreciation of subject; displays detailed thought and consideration of the subject; reveals very good breadth and
depth of understanding.
Independent learning: Work draws on a range of relevant literature and is not confined to reading lists, textbooks or
lecture notes.
Writing skills: Writing skills are well-developed; writing is clear and precise; arguments are logical, well-structured
and demonstrate thorough understanding; conclusions are justified by evidence.
Analysis: Analytical steps carried out carefully and correctly demonstrating that it is based on a sound understanding.
Analysis is relevant to the problem and is complete and is placed in a clear context.
60-69%
Scholarship: Good, broad-based understanding of subject manner; makes effective use of understanding to provide an
informative, balanced argument that is focussed on the topic; reveals some attempt at creative, independent thinking;
main points well covered, displaying breadth or depth but not necessarily both; broadly complete and relevant
argument;
Independent learning: Sources range beyond textbooks and lecture material and are used effectively to illustrate
points and justify arguments.
Writing skills: Arguments are presented logically and coherently within a clear structure and are justified with
appropriate supporting evidence; capably written with good use of English throughout; free from major errors;
complex ideas are expressed clearly and fluently using specialist technical terminology where appropriate.
Analysis: Some minor slips in the steps of the analysis and some minor gaps in understanding of underlying
principles.
Analysis is relevant to the problem and mostly complete. A good interpretation which conveys most of its meaning.
Scholarship: Some but limited engagement with, and understanding of, relevant material but may lack focus,
organisation, breadth, and/or depth; relatively straightforward ideas are expressed clearly and fluently though there
may be little or no attempt to synthesise or evaluate more complex ideas; exhibits limited independent creative
thought; adequate analysis but some key points only mentioned in passing; arguments satisfactory but some errors
and perhaps lacking completeness and relevance in parts.
Independent learning: Sources restricted to core lecture material with limited or no evidence of wider reading.
Writing skills: The question is addressed in a reasonably clear, coherent and structured manner but some sections may
be poorly written making the essay difficult to follow, obscuring key points or leading to over-generalisation;
competently written with a good use of English throughout (few, if any, errors of spelling, grammar and punctuation).
Answers that have merit class qualities may fall into this category if they are too short, unfinished or badly organised.
Analysis: Minor slips and occasional basic errors in analysis. Underlying principles are mostly understood, but clear
gaps are apparent. Analysis falls short of completeness and is a little irrelevant in place but a reasonable interpretation
which goes some way to convey its meaning
50-59%
45-49%
Scholarship: Excellent application of a rigorous and extensive knowledge of subject matter; perceptive; demonstrates
a critical appreciation of subject and extensive and detailed critical analysis of the key issues; displays independence
of thought and/ or a novel and relevant approach to the subject; reveals both breadth and depth of understanding,
showing insight and appreciation of argument.
Independent learning: Work draws on a wide range of relevant literature and is not confined to reading lists, textbooks
or lecture notes; arguments are well supported by a variety of means.
Writing skills: Writing skills are excellent; writing is clear and precise; arguments are logical, well-structured and
sustained, and demonstrate thorough understanding; conclusions are reasoned and justified by evidence.
Analysis: Work demonstrates a robust approach to analysis that is evident of a deep understanding of relevant
concepts, theories, principles and techniques. For quantitative modules analysis is complete and entirely relevant to
the problem.
Minimum requirements have not been met.
Scholarship: Inadequate understanding of key issues and concepts; some material may be used inappropriately;
uninspired and unoriginal; relies on limited knowledge; analysis poor or obscure, superficial or inconsistent in places;
arguments incomplete, partly irrelevant or naive.
Independent learning: Restricted to a basic awareness of course material and textbooks; meagre use of material to
support assertions.
Writing skills: Poor use of English exhibiting errors. Answer may be poorly focussed on the question, lack rigour
and/or consist of a series of repetitive, poorly organised points or unsubstantiated assertions that do not relate well to
one another or to the question, although some structure discernible.
Analysis: Inadequate knowledge of the analysis to be followed, with frequent errors. Some attention paid to underlying
principles, but lacking in understanding and frequently irrelevant. Some interpretation is given, but it does not place
the analysis in any real context
40-44%
Scholarship: Poor knowledge of relevant material; omission of key ideas/material; significant parts may be irrelevant,
superficial or factually incorrect; inappropriate use of some material; mere paraphrasing of course texts or lecture
notes; key points barely mentioned; very weak grasp or complete misunderstanding of the issues; inclusion of
irrelevant material; does not address the topic or question.
Independent learning: Restricted to a basic awareness or no awareness of course material and textbooks; very meagre
use of supporting material or unsupported assertions; use of irrelevant or unconvincing material.
Writing skills: Unacceptable use of English (i.e. comprehension obscured by significant and intrusive errors of
spelling, punctuation and grammar); poor and unclear, or totally incoherent, structure. Answers that ‘run out of time’
or miss the point of the question may fall into this (or a lower) class.
Analysis: Erroneous analysis with mistakes. Very little attention paid to the underlying principles of the analysis. Far
from complete with little relevance to the problem. Limited interpretation that reveals little, if anything, about the
meaning
20-39%
Scholarship: Displays a superficial appreciation of the demands and broad context of the question but is largely
irrelevant, fundamentally flawed, or factually incorrect; inappropriate use of material; mere paraphrasing of course
texts or lecture notes; key points barely mentioned; complete misunderstanding of the issues; inclusion of irrelevant
material.
Independent learning: Restricted to a limited awareness of basic course material; unsupported assertions; use of
irrelevant or unconvincing material.
Writing skills: Minimal structure, though may only list key themes or ideas with limited comment or explanation.
Analysis: Analysis has very significant omissions demonstrating little understanding of problem or underlying
principles.
Analysis may be ill suited to problem. Very little interpretation of meaning of the analysis.
Scholarship: No recognition of the demands or scope of the question and no serious attempt to answer it. Complete
misunderstanding of the issues; inclusion of irrelevant material. May have simply failed to address the question/topic
set.
Independent learning: No evidence that the most basic course material has been understood; unsupported assertions;
use of irrelevant or unconvincing material.
Writing skills: Without structure; comprehension may be completely obscured by poor grammar, spelling, punctuation.
Analysis: Virtually complete failure to carry out analysis. No evidence of understanding of underlying principles
and
bears no relevance to the problem. No attempt to interpret or explain the meaning of the analysis.
0-19%
…
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