You are expected to read beyond textbooks and able to apply the knowledge gain from real life examples either from your working environment: Portfolio and Risk Management Report, APU, Malaysia


Asia Pacific University (APU)

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Assignment Type

Individual Assignment


Portfolio and Risk Management

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should include a one-page Executive Summary in your report. You can choose stocks from NYSE, NASDAQ, SGX, or LSE.

This assignment aims to provide students with an opportunity to analyze various investment alternatives based on the respective risk and return so as to choose the most appropriate investment opportunity. You are expected to read beyond textbooks and able to apply the knowledge gain from real life examples either from your working environment or/and case studies read, and are able to demonstrate your competence in the areas indicated in the questions. You are encouraged to provide specific in-depth comments instead of general comments.

Instructions to students:

a. Download stock prices for twenty (20) companies from different industries and for the benchmark index – 60 monthly closing prices for each. You can use any database to obtain the prices e.g. datastream, yahoo finance (click the Investing tab followed by the Historical Prices tab), etc. Use data from December 2015 to December 2020 to generate 60 monthly returns. Calculate the annualized average return, the standard deviation of the returns, the correlation, and the beta of the twenty stocks.

b. Review the return, standard deviation and beta from (a), and identify any companies that appear to violate the risk and return trade-off concept. Discuss whether the concept of portfolio theory holds — in that portfolio risk is minimized by holding a well-diversified portfolio of shares (such as the All Ordinaries Index portfolio).

d. Group the stock into 4 portfolios according to the beta, market capitalization, book-to-market value as of December 2020. Calculate the return of the four portfolios during January 2021 – December 2021. Discuss any obvious pattern and differences or similarities with the previous empirical studies.

d. Apply the capital asset pricing model (CAPM) equation to predict the expected returns of these shares. (Hint: you must obtain the average return on the government securities).

Compare the companies’ actual average return performance during January 2021 – December 2021 with that expected by the CAPM and discuss what these results suggest about the accuracy of the CAPM as a return-estimating model. Are the share returns consistent with the results of this CAPM evaluation?

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