Financial Metrics for Decision Making - Hypothesis Testing - Finance Assignment Help

Assignment Task :

Instructions Part 1 – Optimisation  

? Randomly select 10 stocks out of the sample of US stocks in S&P500 List. Ensure you identify how you randomly selected the stocks. 

• Note: include the ‘Symbol’ for each of the selected stocks in the Cover worksheet. 

? For the sample selected, form an equally-weighted portfolio (Portfolio A) and estimate daily returns for the period 3 Mar 2020 – 28 Aug 2020 

? For the sample selected, use the Excel add-in Solver to form a portfolio (Portfolio B) which maximises the Sharpe Ratio for the period 3 Mar 2020 – 28 Aug 2020, under the constraint that the total portfolio weight is one. Report the portfolio weights and comment on the feasibility of investing according to the weights obtained. 

Part 2 – Descriptive Analysis 

? Report daily and annualised descriptive statistics which summarise the historical return distribution for both, Portfolio A and Portfolio B, as well as any metrics you consider useful to depict the historical performance of both portfolios. Comment on your findings. 

Part 3 – Hypothesis Testing 

? Plot histograms to contrast the return distribution of: 1) Portfolio A vs S&P500, and 2) Portfolio B vs S&P500. Comment on your findings. 

? At 5% significance level, is the mean daily return of any of these two portfolios higher than the mean return of the S&P 500 index?

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