Financial analysis paper

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MAF759 - ANALYTICAL METHODS Trimester 1, 2020

MAJOR ASSIGNMENT

Due date: 12th May 2020

 An electronic copy of the assignment has to be uploaded via CloudDeakin Drop box

by 5pm (Melbourne time) 12th May 2020. It has to include two files: one Word file, and one Excel file containing all data, calculations and pertinent workings, please using the following files names: MAF759_word; MAF759_excel;

 If you experience any problem in uploading the document, please contact the CloudDeakin help line on 1800 721 720 or go to the website at: http://www.deakin.edu.au/its/servicedesk/

 Late assignment submissions will not be accepted.

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You are analysing U.S stock markets. You have been provided weekly adjusted close prices for NASDAQ (National Association of Securities Dealers Automated Quotations) Composite index, Intel Corporation (INTC), and Microsoft Corporation (MSFT) for the period of January 2010 – December 2019. Data available via Resources – Assessment resources -- Assignment folder.

Please complete the following questions:

1. Calculate weekly holding period returns for the NASDAQ index, Intel Corporation

(INTC) and Microsoft Corporation (MSFT) stocks prices, respectively.

2. Which one has the highest relative risk among the weekly returns of NASDAQ index, INTC and MSFT? Provide evidences.

3. Assuming Normality, what is the probability of the INTC returns above 3%? What is

the probability of the MSFT index returns being between -2% and 2%?

4. Test whether the mean returns of NASDAQ index is significantly different from zero at the 1% level of significance. Test whether the mean returns of INTC is significantly different from 0.5% at the 5% level of significance.

5. What is the covariance of NASDAQ index returns and INTC returns? What is the

correlation coefficient between the MSFT stock returns and INTC stock returns?

6. In order to predict the weekly Intel Corporation (INTC) returns, your supervisor advised two linear regression models:

Model A: Assuming a linear relationship between INTC returns and MSFT returns. Model B: Assuming a linear relationship between INTC returns and MSFT returns

and NASDAQ index return jointly.

6.1: For model A, is the intercept coefficient significant at 5% level? is the slope coefficient significant at 1% level?

6.2: For model B, Construct the 99% confidence interval for the intercept coefficient,

and interpret it. 6.3: Which model you would recommend to your supervisor, and why?

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MARK SHEET

Questions Marks assigned Marks obtained

1 3

2 3

3 4

4 4

5 4

6.1 4

6.2 3

6.3 2

Presentation 3

Total 30