Fin7202Investment Analysis And Portfolio Assessment Answer

Assignment

Overview This is an individual assignment and the focus is on testing the modern portfolio theory. The report will require you to apply the concept of diversification on stock market data. 

Assignment Question

You are required to prepare a report to test an investment theory of diversification by comparing Shariah stocks in any stock market and non-Shariah stocks.

In order to conduct this test, you are required to select three (3) non-Shariah stocks and another three (3) Shariah stocks from any industry. Download the daily stock returns data for the last 5 years for both categories. You can choose any country of your preference.

You can use the Portfolio Theory excel sheet to assist you in this assignment. Please attach this sheet at the end of your assignment.

Required:

Your report should include the followings: 

a) Literature review on diversification. Please refer to at least five latest journals related to diversification.

b) Using the non-Shariah stocks category,

i) Compute the average yearly return and standard deviation of each stock over the past 5-year’s period.

ii) Calculate the portfolio returns and standard deviations TWO (2) and THREE (3) stocks. Discuss your findings and justify the weightage that you choose in each stock. 

c) Using the Shariah stocks category

i) Repeat the computations done in part b (i) and (ii). 

d) Discuss which category provides an effective diversification

e) Overall presentation and structure of the report