School for Business and Society Module Code: MAN00143M Module Title: Stock Investment and Trading Module Leader: Keith Anderson / Theodoros Diasakos Open/Closed Assessment: Open Maximum Word Count: 2,000 Release Date: WC 3/3/2025 Submission Deadline: 1100AM Thursday 29th May 2025 Weighting: 70% Important information A penalty of five marks will be deducted for late submissions that are made within the first hour after the deadline. Submissions that are more than one hour late but within the first 24 hours of the deadline will incur a penalty of ten marks. After the first 24 hours have passed, ten marks will be deducted for every 24 hours (or part thereof) that the submission is late for a total of 5 days. After 5 days it is treated as a non-submission and given a mark of zero. The consequences of non-submission are serious and can include de-registration from the University. If you are unable to complete your open assessment by the submission date indicated above because of Exceptional Circumstances you can apply for an extension. If unforeseeable and exceptional circumstances do occur, you must seek support and provide evidence as soon as possible at the time of the occurrence. Applications must be made before the deadline to be considered. Full details of the Exceptional Circumstances Policy and claim form can be found here: https://www.york.ac.uk/students/studying/progress/exceptional-circumstances If you submit your open assessment on time but feel that your performance has been affected by Exceptional Circumstances you may submit an Exceptional Circumstances Affecting Assessment claim form by 7 days from the published assessment submission deadline. If you do not submit by the deadline indicated without good reason your claim will not be considered. Please take proper precautions to safeguard your work and remember to make backup copies of your data. The University provides all its students with storage space on the University server and you should save and back up any work in progress on this server on a regular basis. Computer failure and theft of your Page 1 of 5 equipment or storage media are not considered exceptional circumstances and extensions cannot be granted for work lost for these reasons. The University has guidance on the use of AI in assessments available here. This details appropriate and inappropriate use of digital tools. Inappropriate use will be considered academic misconduct, and penalised accordingly Word count requirements The word count for this assignment is 2000 words. You must state on the front of your assignment the number of words used and this will be checked. The main text for this assignment must be word-processed in Arial, font 12, double spacing, minimum 2cm margins all around. You must observe the word count specified in this assignment brief. The School has a policy of accepting variations to the recommended word count of plus or minus 5%. What does this mean for you? Markers will mark your work up to the word count maximum plus 5% and then will stop marking; therefore all words which are in excess of the word count plus 5% will not be marked. Where your word count is more than 5% below that specified, it is likely that this will result in a lack of analytical depth or relevant content, which will be reflected in the mark assigned. What is in the word count? The word count includes: - the main text, including in-text reference citations and quotations. The word count does not include: - Appendices. These may be used to include supporting data, which may be too detailed or complex to include as a Table. They are not a device to incorporate material, which would otherwise cause you to exceed the word limit. - Title page - Contents page - Abstract/executive summary - Tables, figures, legends - Reference lists - Acknowledgements Page 2 of 5 Assignment: Section A SC1-3 AG1-5 Answer the following question. This question refers to the seven stocks you have been allocated. You will need to consider the monthly return on each stock over the last ten years, as well as the monthly return on the FTSE 100 index (our proxy for the market portfolio) over the last ten years. You may take the risk-free rate to be the current yield of the 0.125% Treasury Gilt 2026 [Ticker: GB00BYZW3G56] (once you have appropriately converted it into monthly return). You should use Refinitiv and Excel to produce your answer. a) Plot the mean-variance frontier for these seven stocks. [10 marks] b) Plot the capital allocation line (CAL) and identify the optimal risky portfolio according to your calculations. [10 marks] For parts c) and d), as well as your calculations you should describe how each measure defines the risk that an investor faces and how it adjusts portfolio performance for the level of that risk. c) Calculate the Sharpe ratio of the optimal risky portfolio. [5 marks] d) Calculate the Treynor and Jensen measures of the optimal risky portfolio and the FTSE 100. [5 marks] e) Calculate the information ratio of the optimal risky portfolio –using the FTSE100 index as the benchmark. [5 marks] f) Calculate the Sortino ratio of the optimal risky portfolio – using the risk-free rate as the minimum acceptable return. [5 marks] 40 Marks Section B Answer THREE of the following questions. For those questions comprising parts, all parts carry equal weight unless stated otherwise. SC1 AG1-3 1. Alastair James and his partner Sonja Mueller are finance professionals and live in a large rented apartment in Canary Wharf, London. You visit them as their financial advisor because they are planning to buy their first apartment. Three statements that Mr James made to you in your recent interview stuck in your mind: a) “I have researched London property prices extensively on the Internet and over a five-year timescale I believe this is a great time to buy.” Page 3 of 5 b) “I only bought the thirty-year gilts in my portfolio six months ago and they are down almost 10%, so I am waiting until I can get my money back.” c) “After eight years working there, I know UBS are an excellent employer. The shares they give us as part of our bonuses are very unlikely to perform poorly in the long term so I am keeping all of them in my SIPP.” Several behavioural finance terms occur to you as you remember his words, including familiarity, the reference point, overconfidence, representativeness and the illusion of knowledge. Explain each of these terms with reference to what he told you. 20 marks SC1 SC3 SC4 AG1-4 2. Define each of the following terms in Technical Analysis. For a), b) and c) provide i) a generic chart illustrating the general idea and ii) a recent stock price chart of a real share, marking on it where you see the formation appearing. What price movement does each imply? a) Resistance and support lines b) Double top c) Buy signal due to a moving average breakout d) Heavy short interest 20 marks SC1 SC3 SC4 AG1-4 3. The five measures of risk-adjusted portfolio performance are a) The Sharpe ratio b) The Treynor ratio c) Jensen’s alpha d) The information ratio e) The Sortino ratio For each, describe how it defines the risk that an investor faces, and how it adjusts portfolio performance for the level of that risk. 20 marks SC1 SC3 SC4 AG1-4 4. You are an analyst for a wealth management firm who currently manages the optimal risky portfolio from Section A. A prospective client currently holds 60% of her invested wealth on an equally weighted portfolio comprising AstraZeneca (Ticker: AZN), Unilever (Ticker: ULVR), HSBC Holdings (Ticker: HSBA), and BP (Ticker: BP.) with the remaining 40% on the risk-free account (the 0.125% Treasury Gilt 2026 [Ticker: GB00BYZW3G56] from Section A). a) Calculate the slope of the client’s CAL and that of the CML from Section A - using, that is, the FTSE 100 as the market portfolio. Draw both lines, as well as the CAL from Section A, on an expected return–standard deviation diagram. Your Page 4 of 5 analysis should use the same historical data horizon as in section A (i.e., monthly returns over the last ten years). [5 marks] b) Characterise in one or two short paragraphs the advantages/disadvantages of replacing the four-stock risky portfolio in the client’s existing position with (i) the FTSE 100, and (ii) your own fund (the optimal risky portfolio from Section A). State clearly the assumptions on which your assessments are based. [5 marks] c) The client also seeks exposure to the US technology and defence sectors. Choose two US stocks, one from the technology sector and another for the defence sector, to add to the client’s existing risky portfolio. You may assume that the new risky portfolio remains equally weighted across the six stocks while the client’s invested wealth remains split 60-40 across the new risky portfolio and the risk-free account. Compare this alternative position with the client’s current one in terms of (i) the respective financial risk-return profiles (using once again the monthly returns over the last ten years as your data horizon), and (ii) ethical, environmental, and corporate governance issues. [10 marks] 20 Marks SC1 SC3 SC4 AG1-5 5. For this question, you need to consider the daily returns on the FTSE 100 index over the last six months. You may use Excel or Refinitiv to produce your answer. a. Calculate the 14-day relative strength index of the FTSE 100. Graph the RSI against a 30-70 band and the daily closing price of the index. b. Identify every instance in which the relative strength index gives a buy signal when using a 30-70 band. c. Identify every instance in which the relative strength index gives a sell signal when using a 30-70 band. d. How well does the relative strength rule perform in identifying buy or sell opportunities? You should produce a performance summary table. 20 Marks SC1 SC3 SC4 SC6 AG1-4 6. Consider your optimal risky portfolio from Section A. Analyse this portfolio from the perspective of ethical and green investing. In particular, you should identify the potential risks each stock may carry in terms of ESG considerations and suggest alternative strategies to mitigate these risks (for instance, under/overweight or replace a given stock, or add stock/stocks so as to create another portfolio that is comparable in terms of the financial risk-return profile yet superior in terms of its ESG profile). 20 Marks - End of Assessment - Page 5 of 5
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