Beta-H Sheet and Beta-L Sheet: Next, Form two portfolios based on 6 high and 6 low beta stocks.



Alliance University, Bengaluru

EPGDM Term 4 Assignment: MGT436 SAPM – OCTOBER-2020

NOTE: Pl. follow the Instructions carefully…..

1. Select Any 12 stocks (each from Different Industry) from NSE “NIFTY” List (As given in Annexure 1).

2. Download their prices (NSE DATA only) from 1st April, 2020 to 30th September, 2020 (6 months). Save each company data in a separate Excel Worksheet and Label each sheet as “Sr.No. Company Name”. Also download NIFTY data for the corresponding period and put it in sheet “13 NIFTY”.

3. From the price data sheets downloaded above, use only the closing price of the day. Perform data normalization (edit data for price changes due to issue of bonus share and/or share split besides taking care of missing dates). Show in a single EXCEL worksheet “14 Master Data”: all the Dates (1st Column), 12 Stocks prices (Column 2 to 13) and NIFTY Values (Column 14).

4. Now, do the following computations – Label it as “RRB COMP” Sheet:

(a)    Risk-Return: Calculate for each one of the 12 individual stock and the Nifty: Expected Return (using log normal returns) and Risk (Look up your book / material / web for how to calculate them). You can perform these in their respective excel sheets (Sheet numbers 2 to 13). Compile all the 13 risks and returns (stocks and nifty) data in a single table [TABLE 1] in “RRB COMP” Sheet. Interpret the results in your own words.

(b)   Beta Computation: Calculate Beta of each of the individual 12 stocks w.r.t. the Market Index (NIFTY) [The Beta of the reference market index is always taken as 1]. Tabulate the 12 Betas and sort them in decreasing order [TABLE 2]. Divide the list in two parts with first 6 as “High Betas” [TABLE 3] and next 6 as “Low Betas” [TABLE 4] and Comment on your results. All the 4 tables are put in “RRB COMP” Sheet.

5. Beta Low & High Portfolio Analysis:

(a)    Beta-H Sheet and Beta-L Sheet: Next, Form two portfolios based on 6 high and 6 low beta stocks. Call them “Portfolio Beta-H” and “Portfolio Beta-L”. Adopt equal weightage (1/6) for computing the portfolio Risk and Return for “Portfolio Beta-H” and “Portfolio Beta-L” [Use Separate EXCEL Sheets for each Portfolio computation]. Compare the risk and return profiles of these two portfolios and state your interpretation.


(b)   Superior-P Sheet: Finally, answer, which of the two portfolios was found to be superior and Why? Use Sharpe Ratio and Rf = 6% for your answer.


Related Questions in finance category