FNCE90060 : "Historical Data to Estimate and Visualise the Opportunity Set of Risky Assets" - Financial Management Assignment

Financial Management Assignment :

In this assignment, you’re going to work with historical data to estimate and visualise the opportunity set of risky assets. Additionally, you are to determine the efficiency of the market portfolio, as represented by the ASX 200 index. Part 1  :  There are two worksheets in the Excel file. The first worksheet, “Prices”, contains monthly price and dividend data for three stocks (BHP, NAB, and Wesfarmers), as well as price data for the ASX 200 index and monthly risk-free rates. 1. What is the average monthly return for all five assets? 2. What is the volatility of monthly returns for the four risky assets? (Do not calculate this for the risk-free return.) 3. What is the the covariance between each unique pair of the three stocks: BHP & NAB, BHP & WES, and NAB & WES? Part 2 :  The second worksheet, “Portfolios”, contains 21 rows, each with a unique triplet of weights for the three assets. Each triplet represents a unique portfolio. 4. What is the average return and volatility for each portfolio (triplet)? 5. Plot the results from (4) on a graph with volatility on the x-axis and average returns on the y-axis. Using a different indicator/colour, plot the ASX 200 on the same graph. 6. Was the ASX 200 an efficient portfolio over the 60-month interval? Justify your answer. 7. Your answer in (6) is based on the ASX 200 versus only three stocks. Suppose we were to add another 50 stocks. Is it possible your answer to (6) would change? Briefly explain why or why not?