HOLDING PERIOD RETURN (HPR), ARITHMETIC AVERAGE RATE OF RETURN (AAR) ANDGEOMETRIC RATE OF RETURN (GAR). (12+12 MARKS)Select two companies from the list and download daily stock prices from 1 January 2020 to 28 February 2022from Eikon databases and save the data in an excel workbook. You must select a company from the list provided.Calculate the following in an Excel workbook and include this in the part of the business report, along with anexplanation of the method used

HOLDING PERIOD RETURN (HPR), ARITHMETIC AVERAGE RATE OF RETURN (AAR) AND
GEOMETRIC RATE OF RETURN (GAR).
Select two companies from the list and download daily stock prices from 1 January 2020 to 28 February 2022
from Eikon databases and save the data in an excel workbook. You must select a company from the list provided.
Calculate the following in an Excel workbook and include this in the part of the business report, along with an
explanation of the method used
a) Calculate daily HPRs using the closing prices for both companies during the specified period — plot these
results on a line graph(s).
b) Calculate the following summary statistics for the returns:
i. Variance and Standard Deviation
ii. Minimum and Maximum returns
c) Calculate the Arithmetic Average and Geometric Average returns for both companies. Comment on the
findings.
d) Assume you had a savings of $150,000. You had invested the money in your selected companies at the
beginning of the period. Calculate the number of shares you bought for each, given a brokerage fee of
10% of the investment capital (your savings) for every transaction (buying or selling).
Note: at this point of the assignment, assume that your investment ratio is 50:50.
QUESTION 2: DAILY VALUE AT RISK (VAR)
For the two companies selected in Question 1, for which daily stock prices (closing prices) were downloaded:
a) Calculate the daily 1% and 5% Parametric VaR (based on a normal distribution) along with 1% and 5%
Historical VaR for the time series returns for both stocks.
b) Considering your investment in both stocks – express the VaR calculated in (a) as Dollar-VaR and
compare the VaR for both stocks.
QUESTION 3: PORTFOLIO SELECTION
Use the daily stock returns calculated in Question 1 (and 2) for the two stocks and calculate the following:
a) Correlation and Covariance for the stock returns
b) Use various weight combinations to plot an efficient frontier.
c) Minimum Variance Portfolio weights for the portfolio with these two stocks.
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QUESTION 4: THE CAPITAL ASSET PRICING MODEL (CAPM)
Download daily stock index values for ASX-All Ordinaries for the same period as for the two stocks in Question
1 and save the data in an excel workbook1
. Assume a risk-free rate of 1.10 % per annum 2
.
a) Calculate the value of for both stocks using regression analysis.
b) Plot the security characteristic line for both stocks.
c) Compare the level of market risk of both of your stocks while highlighting any significant factor(s)
responsible for the level of .
QUESTION-5: SINGLE INDEX PORTFOLIO RISK AND RETURN (SIM)
Use the Minimum Variance Portfolio asset weights and stock Market Beta (), Alpha () and Residual Variance
(

) to calculate the Portfolio Risk and Portfolio Return. You must use the portfolio risk and return calculation
method based on the Single Index Model (SIM).