Mathematical Finance Project – MF1

An Analysis of global asset allocation during the Covid pandemic.
The data set ‘GlobalEquities.R’ contains daily quotes of equity indices from various
countries. Your main task is to build and backtest mean-variance portfolios based on
these data. Since the portfolio weights depend upon the return’s covariance matrix
and the vector of expected returns, you can use the sample covariance (or similar
estimate) in the required calculations. You will however use the forecasted (one-step
ahead) expected returns as an estimate of expected returns, where the forecasts
should be based on appropriate financial time series modelling. You shall use R to
perform the analyses.

Part A. Oral Presentation
The first part of this module is the preparation and delivery of an oral presentation
1) Data visualisation and summary.
Explore and describe the patterns in the data by using suitable graphical and
statistical methods.
2) Data analysis.
a) Construct mean-variance portfolios for various risk appetite parameter
values, where the expected returns are forecasted using appropriate
models, and evaluate these performances using appropriate measures.
b) Construct long-only equally weighted portfolios for the same risk appetite
parameter values considered in a).
c) For each value of the risk appetite compare the performances of the two
set of portfolios (over rolling windows) by looking at their cumulative
returns.

Part B. Reports
B.1) Group Scientific Report:
You are to write a scientific report on your project topic. You must use the template
typeset in LaTeX “statistics_template_and_guidance.tex”, which is available on the
course DLE site. The report must contain:
1) A write up of your oral presentation including any amendments that follow
Mathematical Finance Project – MF1

2) An application of at least one additional method that you haven’t employed
in Part A.
There is a word limit of 5,000 words for your scientific report.
B.2) Individual Reflective Report:
You are to write a report to reflect your experience in your group project. Your
reflective report should be no more than one A4 sides. You should use 12 point Arial
font and 1.5 lines spacing.

References:
A. Cardinali (2018). Financial Statistics, MATH3623 Module Book, University of Plymouth.