University of Bangor
BIBF
2022/2023
Advanced Investment Theory and Practice
ASSIGNMENT
(Deadline: Monday, 28th of November 2022)
The requirements for this coursework are as follows:
1. The coursework consists of data collection, analysis and interpretation. Although
you may discuss the project with others, the coursework must be written up
individually. You may receive reduced or no marks if there are strong
similarities between the work handed in by two or more people.
2. All questions are to be answered.
3. The work must be tidy and answers clearly stated.
4. Excel is required to acquire the results. You must clearly show how results
were obtained by inserting the relevant spreadsheet screenshot(s) under each
question. However, you are not required to upload the Excel file. You will
only need to upload this word document.
5. An equation editor must be used to type equations.
6. This must be your own work. The University may employ software to check for
any evidence of plagiarism (please see below for more information on plagiarism).
7. You may include references if it is appropriate to do so.
8. The assignment must be word processed, font Times New Roman or Arial, with a
font size of 12 and with lines double-spaced. All work should be spell-checked
and read carefully for typos before handing in.
9. Check that you have answered the question that is asked and that your response
provides a logical reasoned answer.
10. The bibliography should contain only those sources you have referenced in your
assignment. This does not mean that you should include all
books/journals/websites you have read to research your assignment.
11. Referencing in your assignment should take the following forms:
The structural approach of Gilbert (1989) demonstrated that two demand side variablesŠThe behaviour of primary commodity prices is particularly important to many developing
countries where a significant proportion of national income is generated by a small
number of primary products (see Cashin et al., 2000).
A good explanation of the concept of cointegration can be found in Engle and Granger
(1991).
These would be listed in the bibliography as follows:
Cashin, P., Liang, H. and C. McDermott (2000) How persistent are shocks to world
commodity prices?, IMF Staff Papers, 47, 177-217.
Engle, R.F. and C.W.J. Granger (1991) Long-run economic relationships: readings in
cointegration, Oxford University Press, Oxford.
Gilbert, C.L. (1989) The impact of exchange rates and developing country debt on
commodity prices, Economic Journal, 99, 773-84.
Note: The first and the third references are journal articles and the second is a book.
12. Note that your coursework is to be submitted by 10am on Monday 28th of
November 2022.
13. You are strongly advised to submit your work days prior to the actual deadline.
You are also advised to store draft work that you can overwrite as this avoids risk
of missing the deadline due to some unforeseen circumstances.
YOU MUST READ THE INFORMATION WHICH FOLLOWS:
In submitting assignment online, it must be assumed that you have read and
understood the following guidelines about plagiarism. Furthermore, in doing so you
are agreeing to your work being monitored by the JISC Plagiarism Detection
System if a lecturer should deem it necessary to do so.
BIBF Regulation states that
(a) It is an academic offence for a student to cheat in any examination, or in any
other submitted part of his or her BIBF/University work, whether or not such work
is formally assessed. “To cheat” includes:
(i) to copy the work of another candidate or otherwise communicate with
another candidate in an examination;
(ii) to introduce any written, printed or electronically-stored information into
an examination, other than material expressly permitted in the instructions
for that examination;
(iii) to use the work of others (whether in written, printed or some other
form) without acknowledgement, where a judgment is made that the work
has been the result of serious negligence or of intention to deceive;
(iv) to repeat work previously submitted for a different assessed assignment
without full acknowledgement of the extent to which that previous work has
been used.
(b) It is an academic offence for a student knowingly to assist another student to
cheat in any examination, or in any other piece of work, the mark for which will
count either towards the student’s result for the year, or towards his or her final
degree classification.
(c) Allegations of academic offences involving cheating shall be dealt with in
accordance with the Progress Procedures as determined by the Senate. Previous
offences shall be taken into account.
(d) In submitting any piece of University work (e.g., dissertation, thesis, essay or
report) a student shall acknowledge any assistance received or any use of the work of
others.
ASSIGNMENT
Download one-month daily stock prices for Apple, Amazon, and Tesla from
Yahoo Finance which can be accessed free at home. Use daily adjusted close
prices from 2nd August 2021 to 31th August 2021.
1. Present in a table the name of the companies, the dates, the adjusted close
prices and the returns (in %). The table must fit in one page only. Example:
Company A
Date
Company B
Company C
Price Return (%) Price Return (%) Price Return (%)
DD/MM/YY
aa.aa
aa.aa
bb.bb
bb.bb
cc.cc
cc.cc
…
…
…
…
…
…
…
DD/MM/YY
aa.aa
aa.aa
bb.bb
bb.bb
cc.cc
cc.cc
[10 marks]
2. Calculate the average return and variance of returns for each company.
[18 marks]
3. Calculate the variance-covariance matrix and correlation matrix for each
company above.
[27 marks]
4. Select the two companies from question 3 with the lowest correlation
coefficient. Use 5 different combinations of portfolio weights from the below
table for the two companies to create 5 different portfolios. Calculate the
expected return and standard deviation of each portfolio. Present the results in
the following table:
Portfolios
Weight
Company 1
Weight
Company 2
1
1
0
2
0.75
0.25
3
0.5
0.5
4
0.25
0.75
5
0
1
Expected Return
(%)
Standard Deviation
(%)
[20 marks]
5. Draw the Markowitz Efficient Frontier (MEF) using the Tables from question
4.
[15 marks]
6. Discuss briefly on the relationship between correlation and diversification.
[10 marks]

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