INVESTMENT ANALYSIS AND MGT I

Each student will select four stocks that belong to the SP500 (of different sectors) and compare them. The comparison analysis should contain the parts listed below.

1. First, define your investment objective, constraints and risk tolerance. You could fill out an online risk-tolerance questionnaire or simply ask yourself some of these questions: Are you investing for the short or the long run? Are you getting nervous about market declines? Are you young or older person? This would be your investment policy statement (IPS). Please be complete in this section so your selection of the two stocks makes sense.

2. Using 2-year daily data, provide summary information on each stock such as price evolution, n-year return, ratings, etc. (Provide graphs of each stock’s prices and returns as well)

3. Using 2-year daily data, compute the descriptive statistics for each instrument. Explain each metric you computed from the perspective of the investor.

4. Compute additional metrics for the assets such as the correlation and covariance ratios. Also, compute each stock’s alpha, beta, R-square (based on single index model). Interpret your findings from the perspective of the investor.

5. Pair each stock with the risk-free rate and then compare them to the hedged 4-stock portfolio. Discuss the results and determine which portfolio offers the best risk-return tradeoff.

6. Search for significant news in these stocks and determine the impact of these news on these stocks’ prices. Link, if possible, these movements (advances/declines) to the theories/strategies we have learned in class

7. a) if you would choose one of these stocks: Summarize in a couple of sentences your stock selection and compare your overall return from the stock to that of the market. Discuss.
8. b) if you would create a portfolio that consists of these stocks: put in a graph the risk/return of these stocks, and calculate the efficient frontier of all feasible portfolios. Using the risk-free rate, you could allocate the optimum portfolio. Discuss.

In all parts analyzed, you should discuss your findings from the investor’s point of view. In that endeavor, you should examine and interpret all above parts and conclude which fund you should invest in. You should write a report composed of between 1,000 and 1,400 words. This report should also have all relevant software (EXCEL) outputs (such as tables and figures) attached.

1. FURTHER GUIDELINES

Students should ensure that:

the structure of their report is orderly and logical

equations are correctly expressed

outputs are readable

and that their finished project is free from spelling or other typographical or grammatical errors

1. Grading rubric

This project entails 40% of your overall grade. Each question carries following number of points:

Que. 1          10

Que. 2          10

Que. 3          15

Que. 4          15

Que. 5          10

Que. 6          10

Que. 7 a        10

Que. 7 b        20

—–

100 points

1. Turnitin.

Each student must submit electronically the written project to Turnitin prior to the submission to the instructor. Your originality rate cannot exceed the 15% similarity rate.

Plagiarism is an offense. Please refer to your Student Handbook for information regarding the rules on this matter. It is each student’s responsibility to make him/herself aware and adhere to the rules. More details in class.

1. Submission Deadline:

Assignments should be submitted no later than the last day of lectures (TBA).