BBA17: Mr Sebastian Case Study - Average Annualised Returns - Law Assignment Help

Assignment Task:

CASE STUDY:  

PART I (25 marks) 

A 40-year old Australian-based singer, Mr Sebastian, has amassed personal assets with a net  worth of $15.0million and is planning to invest $10.0million in a portfolio and the rest will be  invested in a high-tech business venture. He has asked for your financial advice. Mr Sebastian  is fond of playing competitive team sports like Rugby and Soccer and is usually sad and upset  when his team lost a match. His competitive spirit is reflected in his investing style. He often  reads the Bloomberg news feed on his smartphone. He is an avid reader of books written by  investment gurus, namely King Icahn and Warren Buffett. He seeks expert advice but he  always likes to have a good debate before making up his mind. He started his singing career  as you-tuber and recorded all his songs using a smartphone. Following his rise to fame, he  now owns a music studio where he rehearses his songs and music. You have researched  three assets (i. e: asset 1, asset 2 and asset 3 as allocated to each team as per Appendix II  & III) and are planning to do the following tasks: 

(i) Compute the assets’ respective average annualised returns, variance and covariance  between each pair of the assets based on daily historical data over the last 3 years;

(ii) Construct a portfolio using the asset 1, 2 and 3 such that the Sharpe ratio is maximised; [5 marks] 

(iii) Construct an optimal portfolio which matches the investor’s risk tolerance (as per  Appendix II and III) with the capital market line; 

(iv) Determine the equity beta of asset 3 using regression analysis of daily historical data  over the periods: (i) 1 January 2020 till 30 September 2020 and (ii) 1 January 2019 till  30 September 2020. Compare your results for the beta over the two sample periods  and provide a valid interpretation. 

(v) Referring to the psychographic profiling model outlined in this course, identify the type  of investor you would describe Mr Sebastian. Provide valid reasons to support your  judgement.

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