[DOC] Financial Management Assignment

Added on - 21 Apr 2021

  • 12

    Pages

  • 2433

    Words

  • 8

    Views

  • 0

    Downloads

Trusted by +2 million users,
1000+ happy students everyday
Showing pages 1 to 4 of 12 pages
Running head: FINANCEFinanceName of the Student:Name of the University:Authors Note:
FINANCE1Table of ContentsPART A:.....................................................................................................................................21. Defining the findings that was derived by researcher in the article:......................................22. The factors depicting by Fama-French in the article, which explains stock returns:.............23. Indicating the measures of risk that Fama-French concluded to explain stock returns:........24. Mentioning the implications of Fama-French model and CAPM Model:.............................35. Explaining with the summary of academic paper providing objective of the academic paperand the reason Fame-French model is used in the paper:..........................................................3PART B:.....................................................................................................................................5a) Expected return and standard return of Minimum Portfolio Variance:.................................5b) Calculating the optimal risky portfolio’s mean and standard deviation:...............................7c.i) Standard Deviation of the portfolio with targeted returns:..................................................9c.ii) Detecting the contribution of T-bill fund and to risky funds:.............................................9Reference and Bibliography:....................................................................................................11
FINANCE2PART A:1. Defining the findings that was derived by researcher in the article:The article mainly states the difference between value stock and growth stock bystating the return, which is provided by both the stocks. The researcher pointed out thelimitations of growth stock and the hindrance it possesses to investors for generate highretune from investment. The comparison between the return and risk of value and growthstock is conducted to determine the actual significance of value stocks. Eugene Fama andKenneth French proposed that value stock due to the reduces prices and high asset valuationis the best buying option for investors, as share price value of growth stocks is always highdue to the demand among investors (Koijen, Lustig and Van 2017).2. The factors depicting by Fama-French in the article, which explains stock returns:Fama-French in the article mainly explained the return of stock return, which mightallow investors to improve the return from investment. In addition, the Fama-French indicatesthat there are two factors namely market risk factors and value growth risk factor, whichcould explain the return, which is provided from investment. This detection of risk factorsmight help in generating high level of return, which could generate return from investment.Some researchers stated that with the evaluation of risk and return attribute of stock, investorscan generate high level of return from investment by controlling risk attributes of theirportfolio (Tsuji 2016).3. Indicating the measures of risk that Fama-French concluded to explain stock returns:Fama-French focuses on precise risk measure, where they added that market riskfactors and value growth risk factor are the major risk, which needs to be evaluated before
FINANCE3investing. In addition, the use of market risk factors might help investors in detecting theimplications of capital market on return generation capacity of the stocks. This couldeventually allow investors to avoid stock with high beta, which could hamper their actualreturn from investment. The value growth risk factors allow investor to detect stocks withhigh valuation, which could increase return from investment and raise the investment capital(Sornette 2017).4. Mentioning the implications of Fama-French model and CAPM Model:The researcher in the relevant academic paper indicates the implications of bothCAPM model and Fame-French model, which could allow investors to detect risk and returnattributes of the stocks. The first implication for the investors regarding CAPM is itssimplicity and to view the risk involved in investment. Moreover, it is stated that there aremore additional dimensions of risk, which could generate high level of returns frominvestment. On the other hand, the second implication is that value stock has higher return incomparison with growth stocks, which is detected from evaluating markets around the world.The implication of Fame-French model mainly states that stocks with high value can generatemore return in comparisons to stock with growth attributes, as they are undervalued (Shenand Tzeng 2015).5. Explaining with the summary of academic paper providing objective of the academicpaper and the reason Fame-French model is used in the paper:The evaluation of academic paper “Choosing Factors” by Eugene F. Fama andKenneth R. French, mainly indicates the issues that has been arising in five factor Fame-French model (Fama and French 2016). The researcher in the academic paper mainly depictsthe issues of the investment model, which might hamper risk and return attribute of theinvestor. The three issues that are identified from the academic paper are depicted as follows.
desklib-logo
You’re reading a preview
Preview Documents

To View Complete Document

Click the button to download
Subscribe to our plans

Download This Document