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MFIN 305 - Online Assignment 1

This document provides instructions for an online assignment in quantitative methods of finance. Students are asked to: 1. Analyze monthly return data for 10 stocks from 2008-2020 to identify the two most volatile stocks and report their annualized returns and volatilities. 2. Plot the value of a $100 investment in each of 10 funds from 2008-2020 using monthly simple returns. 3. Compute and report the cumulative return for 1 year for a selected stock using continuously compounded and simple monthly returns. 4. Compute and compare the average volatility of 10 stocks to the volatility of an equally weighted portfolio using monthly returns from 2008-2020. 5. Analyze monthly returns for 1 stock from

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59 views1 page

MFIN 305 - Online Assignment 1

This document provides instructions for an online assignment in quantitative methods of finance. Students are asked to: 1. Analyze monthly return data for 10 stocks from 2008-2020 to identify the two most volatile stocks and report their annualized returns and volatilities. 2. Plot the value of a $100 investment in each of 10 funds from 2008-2020 using monthly simple returns. 3. Compute and report the cumulative return for 1 year for a selected stock using continuously compounded and simple monthly returns. 4. Compute and compare the average volatility of 10 stocks to the volatility of an equally weighted portfolio using monthly returns from 2008-2020. 5. Analyze monthly returns for 1 stock from

Uploaded by

Monzer Shkeir
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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MFIN 305: Quantitative Methods of Finance

Fall 2020-2021
Online Assignment
Sections 1 and 2

You should use Eviews for Questions 1, 4 and 5 and Excel for Questions 2 and 3. You should
also post two excel files containing your data for the exact same sample period that you are
working with in this Online Assignment. One excel file should contain price data for your
ten stocks at the monthly frequency and one should contain price data for your ten funds at
the monthly frequency.

1. Using monthly data and continuously compounded returns for the period January 2008 to
August 2020, identify the two most volatile stocks among your ten (i.e. the two stocks with the
highest standard deviations) and report their annualized returns and standard deviations (i.e.
volatilities).
2. Using monthly data and simple returns for the period January 2008 to August 2020 plot
the value of a $100 investment in each of your ten funds across time. Look at Figure 3.20 (page
134) of your book or my model answers for guidance.
3. Select one stock from your list of ten stocks and use monthly data for that stock for August
2019 to August 2020 to compute the cumulative return for the year using continuously
compounded and simple returns and report both numbers. State which stock you are working
with clearly.
4. Using monthly data on the ten stocks for the period January 2008 to August 2020 compute
the volatility (i.e. standard deviation) of each stock and average the ten standard deviations.
Report the latter number. Then construct the return (be careful which return computation you
use) on an equally weighted portfolio of the ten stocks and compute its volatility (i.e. standard
deviation). Is the average volatility of the ten stocks or the portfolio volatility lower? (Hint:
You can construct the portfolio return in Eviews by typing something like: RP =
0.1*R1+0.1*R2+….+0.1*R10)
5. Using monthly data on any one of your ten stocks for the period January 2008 to August 2020,
construct the monthly standardized returns and plot a histogram of the standard returns along
with the theoretical standard normal density. Report the skewness and the kurtosis of the
returns (not standardized). Do the returns on your stock appear to be normally distributed?
Why or why not? Explain.

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