Investment and Portfolio Management - Assignment
Added on 2021-04-21
12 Pages2987 Words54 Views
Running head: INVESTMENT AND PORTFOLIO MANAGEMENTInvestment and Portfolio ManagementName of the Student:Name of the University:Authors Note:
INVESTMENT AND PORTFOLIO MANAGEMENT1Table of ContentsPART A:.....................................................................................................................................21. Stating the finding on investment:.........................................................................................22. Stating the factors examined by Fama-French that might explain stock returns:..................23. Stating the measure of risk implemented by Fama-French model for the investors:.............34. Describing the implications of CAPM model and Fama-French model on investors:..........35. Providing summary of the academic paper and the reason Fama-French model was used inthe paper:....................................................................................................................................4PART B:.....................................................................................................................................7a) Depicting the expected return and standard deviation of the minimum-variance portfolio:.7b) Depicting the expected return and standard deviation of optimal risky portfolio:................9c.i) Calculating standard derivation of the portfolio:...............................................................10c.ii) Calculating the portion of T-bill fund and each of the two risky funds:..........................11Reference and Bibliography:....................................................................................................12
INVESTMENT AND PORTFOLIO MANAGEMENT2PART A:1. Stating the finding on investment:The researcher in the article mainly indicates the performance of value stock inaccordance with growth stocks. The researcher highlighted the misgivings in growth stockand benefits provided by value stocks. In addition, the researcher pointed out the investors inexpectation of higher return from growth stock increase its value, which does not occur atlast. The researcher has conducted relevant evaluation and detect the validity of capital assetpricing model. Moreover, the financial performance of the companies consists of growthstock do not provide all the relevant return to the shareholder. On the other hand, theresearcher pointed out the value stock being undervalued can provide high return frominvestment to the investors. The researcher also pointed out the financial performance ofvalue stock were more than growth stocks, as founded in US Stocks (Chandra 2017).2. Stating the factors examined by Fama-French that might explain stock returns:Fama-French states relevant factors for analysing the overall financial performance ofthe company and detect overall growth, which could increase return from investment.Moreover, Fama-French mainly states that two factors are needed for analysing the overallaverage return of the stocks. The factors are market risk factors and value growth risk factor,which is indicated by Fama-French that the use of both the factors could help in detecting theactual returns from investment. The identified factors might help in detecting the actualreturns of the company, which might allow the investor to identify stock with least returns.The value growth factors are mainly detected by differentiating between internationalportfolio of high book-to-market stock and the return provided by portfolios with low book-to-market stocks. In this context, Pagdin and Hardy (2017) mentioned that Fama-French
INVESTMENT AND PORTFOLIO MANAGEMENT3models is helpful in detecting stock with the low risk, which could help in geniting high levelof return from investment. 3. Stating the measure of risk implemented by Fama-French model for the investors:The Fama-French model mainly focuses its overall risk measure on two differentforms, which could help in detecting stocks returns and increase profits from investments.The risk attributes are market risk factor and a value-growth risk factor, which is needed foranalysing the actual risk hindering operational capability of the company. Moreover, CAPMmodel mainly focuses on one factor, which does not help in detecting the actual financialposition of the company. Furthermore, the risk implementation of Fama-French might help ingenerating high level of profits. The market risk factor helps in evaluating the actual returnsfrom investment, which could be provided by a stock. In addition, the value-growth factorwould allow investors in detection the actual value of stock and the return it could providefrom investment (Kashyap 2016).4. Describing the implications of CAPM model and Fama-French model on investors:CAPM model mainly has relevant implications to the investors, which help indetecting the risk and return from investment. In addition, the CAPM model helps indetermining the return and risk in stocks. This might help in detecting return and riskinvolved in investments of the company, which might allow investors to generate high levelof returns. Raab and Stahn (2017) stated that CAPM model evaluates beta and expectedreturn of stocks, which is essential to create portfolio with low risk and high returns.Moreover, the Fama-French model is used in evaluating examine multi-factor models,which could help in detecting risk that could impact expected return of stock. In addition, theFama-French model evaluates two additional dimensions of risk that get rewarded nature of
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
[DOC] Financial Management Assignmentlg...
|12
|2433
|100
DFA Add Value For Its Investorslg...
|18
|1634
|341
Investment Management Theorieslg...
|17
|3990
|15
FINA 6000 Managing Finance - Assignmentlg...
|5
|634
|29
Using CAPM and Fama-French Models to Evaluate Stock Performancelg...
|5
|1054
|165
Assignment | Investment Managementlg...
|6
|1381
|26