Assignment: Comparing the Average Return on the ASX200 With Each Company

Running head: BUSINESS FINANCE
Business Finance
Student Name:
Student Number:
Authors Note:

BUSINESS FINANCE
Table of Contents
Part 1:.........................................................................................................................................2
a) Comparing the average return on the ASX200 with each company:.....................................2
b) Identifying the average return of the portfolio, while explaining how the output was
derived:.......................................................................................................................................2
Part 2:.........................................................................................................................................3
a) Calculating the standard deviation of returns for the five companies, while depicting about
the overall risk of the companies:..............................................................................................3
b) Computing the standard deviation of the portfolio, while comparing it with the risk of
individual companies:................................................................................................................3
c) Comparing the standard deviation of returns of the ASX200 index with that of individual
shares and the equally weighted portfolio:.................................................................................3
Part 3:.........................................................................................................................................4
a) Estimating the beta for each company:..................................................................................4
b) Briefly explaining why each company has high/low of beta:................................................4
Part 4:.........................................................................................................................................4
a) Providing a short report for the client of Tri-Star Management:...........................................4
b) Providing relevant recommendations for Client of Tri-Star Management to invest of these
five companies:..........................................................................................................................6
References:.................................................................................................................................7
Appendices:................................................................................................................................8

BUSINESS FINANCE
Part 1:
a) Comparing the average return on the ASX200 with each company:
ASX200 AGL.AX ($A) ANZ.AX ($A) NAB.AX($A) QAN.AX ($A) WBC.AX ($A)
Mean 0.104 1.715 0.074 0.089 2.107 0.086
The return generation capability of two stocks is higher than the market index while
the other three stocks have generated lower returns during the period. The analysis has
indicated that AGL and QAN have generated the highest level of returns, which has exceeded
the market return of 0.104. On the other hand, ANZ generated return of 0.074, NAB
generated a return of 0.089 and WBC generated return of 0.086. The returns have indicated
that only two stocks out from the market while others are underperformers.
b) Identifying the average return of the portfolio, while explaining how the output was
derived:
Portfolio (equal weight)
Mean 0.696
The average return of the portfolio is at the levels of 0.696, which is higher than the
overall market return of 0.104. This mainly indicates that the portfolio created for investment
has outperformed the market and generated a high level of returns. The average returns have
been derived by multiplying the weights with the monthly returns of the five stocks and
deriving the average returns of the outcome (Lim, Oh and Zhu 2014).