ECOM2001: Quantitative Techniques for Business - Report Writing Economics Assignment Help

Assignment Task:

Introduction 

The aim of this project is to prepare, evaluate and analyse a portfolio consisting of four financial assets. It requires a deep understanding of both the statistics and the mathematics components of this unit. You should be able to do parts of this project as the unit progresses. It is recommended that you work on this on a weekly basis. 

Refer to the rubric at the end of this document to understand how this assessment will be graded. In particular, note that all figures need to be numbered and labelled, and you need to include all the steps to involved with arriving at each of your answers. 

Your final report should be either a pdf or a Word document. You are encouraged to use RMarkdown to develop your pdf and to show your coding by setting echo = TRUE. Do not attempt to submit an Excel file (this is not an accepted file type) and do not include your entire data set in your submission.

The Analysis 

1. [10 Points] Create a histogram for each of the returns series (explain how you determined the number of bins to use). Also, report the descriptive statistics in a single table which includes the mean, median, variance, standard deviation, skewness and kurtosis for each series. What conclusions can you draw from these de- scriptive statistics? 
2. [10 Points] Under the assumption that the returns of each asset are drawn from an independently and iden- tically distributed normal distribution, are the expected returns of each asset statistically di erent from zero at the 1% level of significance? Provide details for all 5 steps to conduct a hypothesis test, including the test statistic. Calculate and report all the relevant values for your conclusion and be sure to provide an interpre- tation of the results. 
3. [10 Points] Assume the returns of each asset are independent from each other. With this assumption are the mean returns statistically di erent from each other at the 1% level of significance? Provide details for all 5 steps to conduct the hypothesis tests using what your have learned in the unit. Calculate and report all the relevant values for your conclusion and be sure to provide and interpretation of the results. (Hint: You need to discuss the equality of variances to determine which type of test to use.) 
4. [5 Points] Calculate and present the correlation matrix of the returns. Discuss the direction and strength of the correlations. 
5. [20 Points] Is the assumption of independence realistic? Provide evidence to support your conclusion. If independence is not realistic, re-test the hypotheses in Question 5 using a more appropriate test, providing all 5 steps of the hypothesis test. (Hint: You are required to test the significance of the correlations.) 
6. [30 Points] If you can only choose a maximum of two assets to hold in your portfolio, which two would you choose? What are the optimal weights and the optimal expected returns? Provide evidence to support your answer, including all the steps undertaken to arrive at the result. (Hint: review your tutorial notes on portfolio optimisation. A complete solution will provide: an objective function, the steps necessary to arrive at the result, the expected returns, and a comparison of the results for each possible portfolio.)

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