BX2031 SP51 2024
Investment and Portfolio Analysis
Group project (30%)
GROUP PROJECT DESCRIPTION
Project Information
This project accounts for 30% of the assessment in this subject and requires students to complete a written project and an Excel file. The written report along with your spreadsheet analysis is due by 11:59pm on Apr 20, 2024 (Singapore time). Late submissions will incur penalties. The project involves data analysis and collection, so it's recommended that students use sources like Yahoo Finance, Google Finance, or Bloomberg to gather relevant data.
Contribution Statement Instructions: Submit a comprehensive contribution statement via email to my email ([email protected]) on the submission date. Copy all group members in the email to ensure transparency. The contribution statement should clearly outline the percentage of each group member's participation and contribution to group activities and overall output. Failure to send this email before the submission deadline or neglecting to copy all group members will result in assuming equal contribution across the group. Individual grades will be adjusted based on the specified contribution percentages outlined in the subject outline.
The submission for group projects should include:
1. Written Presentation
The document should have double spacing, 1" margins, and use a font size of at least 11 points. A cover page is mandatory. The project's word limit is 2,500 words, excluding the executive summary, cover page, table of contents, charts, headings, Excel-imported tables, and appendices. Projects not adhering to these guidelines will not be accepted. Citations should follow the Harvard referencing style. If you're unfamiliar with Harvard referencing, you can seek assistance from Library staff.
2. Excel File
The Excel file must include a spreadsheet named "Data Note," providing download links for the data. Other spreadsheets should showcase calculations and estimations that yield the results presented in your report file. Each spreadsheet should be named according to the requirement number, such as "Requirement 1," "Requirement 2," and so on.
Projects which do not conform. to the above will not be accepted.
Project Requirements
Required
1 Give a brief introduction of two companies: Singapore Airlines Limited (C6L.SI) and Singapore Exchange Limited (S68.SI) [5 marks]
2 Present return and risk of the two companies
Some instructions:
• Download monthly share price data for the two companies above over the last five years ending on 31 Dec 2023.
• Calculate the monthly return for each company over this five-year period (based on discrete return)
• Plot the monthly return series. Does each series have a normal distribution? Comment.
• Calculate the expected monthly return and expected annual return for each company. Comment.
• Calculate the standard deviation of monthly return and annual standard deviation for each company. Comment.
• Calculate the correlation coefficient between the two shares. Comment.
• As a risk-averse investor, which company should you invest your money in? [15 marks]
3 Beta estimation and asset pricing.
Some instructions:
• Estimate the beta values of the two companies. Comment.
• As a risk-averse investor, which company should you invest your money in?
• Obtain the risk-free rate.
• Estimate the expected rate of return on each share using the CAPM model. [10 marks]
4 Valuation using Dividend Discount Model.
Some instructions:
• Forecast the next three years of dividends for the two companies. Justify your forecasts.
• Assume the dividends after the next three years (from year 4 onwards) is the same as the average of the forecasted three-year dividends above, use the Dividend Discount Model to estimate the value of one share for each company using the dividend discount model (the discounting rate is the estimated expected return from Part 3).
• Provide the recommendation to the share investors based on the results of the estimated value of each share. [15 marks]
5 Valuation using PE Model.
Some instructions:
• Calculate P/E ratios over the last five years for the two companies and then the average P/E for each company.
• Calculate the average P/E of the two companies.
• Forecast EPS of each company in 2024 based on historical EPS.
• Estimate price per share for each company in 2024 using PE model
• Provide the recommendation to the share investors based on the results of the estimated value of each share. [15 marks]
6
Assume that an investor decides a risky portfolio based on two stocks, C6L and S68. Using the annual expected return and standard deviation and correlation coefficient obtained from section 2 for the two stocks, and the current risk free rate collected in section 3,
· Tabulate and draw the investment opportunity set of the two shares using investment proportions for the C6L of 0% to100% in increments of 10%.
· Calculate the expected return and standard deviation for the minimum-variance portfolio
· Draw a tangent from the risk-free rate to the opportunity set.
· Calculate the expected return and standard deviation for the optimal risky portfolio
· The investor decides to add risk free asset to the risky portfolio. Assume that the the risk aversion level of this investor is 3, estimate the optimal weights of the risky portfolio and risk free asset in the complete portfolio. [35 marks]
7 Conclusion
[5 marks]