Financial Modelling and Analysis: All Ordinaries Index Case Study 2019

This document presents a comprehensive financial modelling case study solution focused on the All Ordinaries Index (AllOrd) and its volatility. The analysis begins by calculating monthly index returns (AOret) and plotting the relationship between AllOrd return and its standard deviation (AOSD), followed by a summary of the relationship. The study then investigates the correlation between AOret and AOSD, and explores autocorrelation within these variables. Furthermore, the impact of the Global Financial Crisis (GFC) on the correlation between returns and standard deviation is examined by comparing pre- and post-GFC data. Hypothesis testing is conducted to assess differences in AOret and AOSD before and after the GFC, using z-tests. Finally, the case study investigates volatility clustering and compares the volatility of AOSD and AUDSD using a t-test, providing valuable insights into market behavior and risk assessment. The document provides a detailed analysis of the financial performance of the business and stock of the particular company in the market.

Financial Modelling and analysis
1

Table of Contents
Part A...............................................................................................................................................3
Question -1...................................................................................................................................3
1................................................................................................................................................3
2................................................................................................................................................9
3................................................................................................................................................9
Question 2..................................................................................................................................10
1..............................................................................................................................................10
2..............................................................................................................................................10
3..............................................................................................................................................10
Question 3..................................................................................................................................11
1..............................................................................................................................................11
2..............................................................................................................................................11
Question 4..................................................................................................................................12
1..............................................................................................................................................12
2..............................................................................................................................................12
Question 5..................................................................................................................................13
1..............................................................................................................................................13
2..............................................................................................................................................14
3..............................................................................................................................................15
2

Part A
Question -1
1.
Date AllOrd Aoret ( Before)
4/28/2000 3085.1 -1.442416777
5/31/2000 3040.6 7.136749326
6/30/2000 3257.6 -1.350687623
7/31/2000 3213.6 1.496763754
8/31/2000 3261.7 -0.478278198
9/29/2000 3246.1 -1.300021564
10/31/2000 3203.9 0.564936484
11/30/2000 3222 -2.088764742
12/29/2000 3154.7 4.336386978
1/31/2001 3291.5 -0.528634361
2/28/2001 3274.1 -5.412174338
3/30/2001 3096.9 5.599147535
4/30/2001 3270.3 1.434119194
5/31/2001 3317.2 3.255757868
6/29/2001 3425.2 -4.50776597
7/31/2001 3270.8 -1.620398679
8/31/2001 3217.8 -7.141525266
9/28/2001 2988 6.603078983
10/31/2001 3185.3 2.875710294
11/30/2001 3276.9 2.532881687
12/31/2001 3359.9 1.312539064
1/31/2002 3404 -1.333725029
2/28/2002 3358.6 0.13993926
3/29/2002 3363.3 -1.896946451
4/30/2002 3299.5 0.775875133
5/31/2002 3325.1 -4.869026495
6/28/2002 3163.2 -4.1287304
7/31/2002 3032.6 1.355272703
8/30/2002 3073.7 -4.730455152
9/30/2002 2928.3 2.277772086
10/31/2002 2995 1.008347245
11/29/2002 3025.2 -1.642866587
12/31/2002 2975.5 -1.34767266
1/31/2003 2935.4 -5.348504463
3

2/28/2003 2778.4 2.526634034
3/31/2003 2848.6 4.293337078
4/30/2003 2970.9 0.29957252
5/30/2003 2979.8 0.667830056
6/30/2003 2999.7 3.567023369
7/31/2003 3106.7 3.096533299
8/29/2003 3202.9 -0.833619532
9/30/2003 3176.2 3.34361816
10/31/2003 3282.4 -2.641359981
11/28/2003 3195.7 3.451512971
12/31/2003 3306 -0.677555959
1/30/2004 3283.6 2.707394323
2/27/2004 3372.5 1.301704967
3/31/2004 3416.4 -0.254654022
4/30/2004 3407.7 1.443789066
5/31/2004 3456.9 2.123289653
6/30/2004 3530.3 0.447554032
7/30/2004 3546.1 0.445559911
8/31/2004 3561.9 3.166849154
9/30/2004 3674.7 3.036982611
10/29/2004 3786.3 4.133322769
11/30/2004 3942.8 2.797504312
12/31/2004 4053.1 1.322444549
1/31/2005 4106.7 1.212652495
2/28/2005 4156.5 -1.344881511
3/31/2005 4100.6 -3.840901332
4/29/2005 3943.1 3.228424336
5/31/2005 4070.4 3.918533805
6/30/2005 4229.9 2.761294593
7/29/2005 4346.7 1.536798031
8/31/2005 4413.5 4.058003852
9/30/2005 4592.6 -3.917171101
10/31/2005 4412.7 3.872912276
11/30/2005 4583.6 2.731477441
12/30/2005 4708.8 3.639993204
1/31/2006 4880.2 -0.036883734
2/28/2006 4878.4 4.280091833
3/31/2006 5087.2 2.35493002
4/28/2006 5207 -4.507393893
5/31/2006 4972.3 1.240874444
6/30/2006 5034 -1.527612237
4

7/31/2006 4957.1 2.475237538
8/31/2006 5079.8 0.653569038
9/29/2006 5113 4.691961666
10/31/2006 5352.9 2.030674961
11/30/2006 5461.6 3.345173576
12/29/2006 5644.3 2.009106532
1/31/2007 5757.7 1.021241121
2/28/2007 5816.5 2.790337832
3/30/2007 5978.8 3.002274704
4/30/2007 6158.3 2.979718429
5/31/2007 6341.8 -0.491973888
6/29/2007 6310.6 -1.950686147
7/31/2007 6187.5 0.982626263
8/31/2007 6248.3 5.323047869
9/28/2007 6580.9 3.011746114
10/31/2007 6779.1 -2.736351433
11/30/2007 6593.6 -2.617689881
12/31/2007 6421 -11.27550226
1/31/2008 5697 -0.391434088
2/29/2008 5674.7 -4.669850389
3/31/2008 5409.7 4.571418008
4/30/2008 5657 2.066466325
5/30/2008 5773.9 -7.637818459
6/30/2008 5332.9 -5.256052054
7/31/2008 5052.6 3.224082651
8/29/2008 5215.5 -11.20122711
9/30/2008 4631.3 -14.0047071
10/31/2008 3982.7 -7.783664348
11/28/2008 3672.7 -0.364854194
12/31/2008 3659.3 -4.951766731
1/30/2009 3478.1 -5.209740951
2/27/2009 3296.9 7.140040644
3/31/2009 3532.3 6.013079297
4/30/2009 3744.7 1.83192245
5/29/2009 3813.3 3.527128734
6/30/2009 3947.8 7.642231116
7/31/2009 4249.5 5.520649488
8/31/2009 4484.1 5.691220089
9/30/2009 4739.3 -1.949655012
10/30/2009 4646.9 1.476252986
11/30/2009 4715.5 3.545753367
5

12/31/2009 4882.7 -5.85331886
1/29/2010 4596.9 1.17905545
2/26/2010 4651.1 5.203070241
3/31/2010 4893.1 -1.209866956
4/30/2010 4833.9 -7.867353483
5/31/2010 4453.6 -2.892042393
6/30/2010 4324.8 4.222160562
7/30/2010 4507.4 -1.521941696
8/31/2010 4438.8 4.462917906
9/30/2010 4636.9 2.081131791
10/29/2010 4733.4 -1.204208391
11/30/2010 4676.4 3.645966983
12/31/2010 4846.9 0.061895232
1/31/2011 4849.9 1.519618961
2/28/2011 4923.6 0.10155171
3/31/2011 4928.6 -0.600576229
4/29/2011 4899 -2.247397428
5/31/2011 4788.9 -2.695817411
6/30/2011 4659.8 -3.418601657
7/29/2011 4500.5 -2.904121764
8/31/2011 4369.8 -6.858437457
9/30/2011 4070.1 7.134959829
10/31/2011 4360.5 -4.031647747
11/30/2011 4184.7 -1.761177623
12/30/2011 4111 5.222573583
1/31/2012 4325.7 1.442541092
2/29/2012 4388.1 0.726966113
3/30/2012 4420 1.067873303
4/30/2012 4467.2 -7.465526504
5/31/2012 4133.7 0.043544524
6/29/2012 4135.5 3.721436344
7/31/2012 4289.4 1.156338882
8/31/2012 4339 1.551048629
9/28/2012 4406.3 2.929895831
10/31/2012 4535.4 -0.383648631
11/30/2012 4518 3.244798583
12/31/2012 4664.6 5.067958667
1/31/2013 4901 4.476637421
2/28/2013 5120.4 -2.743926256
3/29/2013 4979.9 3.789232716
4/30/2013 5168.6 -4.925898696
6

5/31/2013 4914 -2.820512821
6/28/2013 4775.4 5.450852285
7/31/2013 5035.7 1.779295828
8/30/2013 5125.3 1.802821298
9/30/2013 5217.7 3.882936926
10/31/2013 5420.3 -1.955611313
11/29/2013 5314.3 0.730105564
12/31/2013 5353.1 -2.764753134
1/31/2014 5205.1 4.040268198
2/28/2014 5415.4 -0.228976622
3/31/2014 5403 1.254858412
4/30/2014 5470.8 0.054836587
5/30/2014 5473.8 -1.677079908
6/30/2014 5382 4.479747306
7/31/2014 5623.1 0.026675677
8/29/2014 5624.6 -5.827969989
9/30/2014 5296.8 3.930675125
10/31/2014 5505 -3.758401453
11/28/2014 5298.1 1.708159529
12/31/2014 5388.6 3.024904428
1/30/2015 5551.6 6.248649038
2/27/2015 5898.5 -0.620496736
3/31/2015 5861.9 -1.504631604
4/30/2015 5773.7 0.020783899
5/29/2015 5774.9 -5.605291867
6/30/2015 5451.2 4.228426768
7/31/2015 5681.7 -8.089128254
8/31/2015 5222.1 -3.130924341
9/30/2015 5058.6 4.546712529
10/30/2015 5288.6 -1.331165148
11/30/2015 5218.2 2.422291212
12/31/2015 5344.6 -5.388616548
1/29/2016 5056.6 -2.149665783
2/29/2016 4947.9 4.120940197
3/31/2016 5151.8 3.187235529
4/29/2016 5316 2.47930775
5/31/2016 5447.8 -2.522119021
6/30/2016 5310.4 6.282012654
7/29/2016 5644 -2.030474841
8/31/2016 5529.4 -0.077766123
9/30/2016 5525.1 -2.220774285
7

10/31/2016 5402.4 1.851029172
11/30/2016 5502.4 3.938281477
12/30/2016 5719.1 -0.771100348
1/31/2017 5675 1.515418502
2/28/2017 5761 2.47873633
3/31/2017 5903.8 0.741895051
4/28/2017 5947.6 -3.132355908
5/31/2017 5761.3 0.046864423
6/30/2017 5764 0.171755725
7/31/2017 5773.9 0.041566359
8/31/2017 5776.3 -0.543600575
9/29/2017 5744.9 4.029661091
10/31/2017 5976.4 1.351984472
11/30/2017 6057.2 1.817671531
12/29/2017 6167.3 -0.33726266
1/31/2018 6146.5 -0.475067111
2/28/2018 6117.3 -4.060614977
3/29/2018 5868.9 3.453798838
4/30/2018 6071.6 0.854799394
5/31/2018 6123.5 2.714134074
6/30/2018 6289.7 1.216274226
7/31/2018 6366.2 0.967610191
8/31/2018 6427.8 -1.591524316
9/30/2018 6325.5 -6.516480911
10/31/2018 5913.3 -2.773409095
11/30/2018 5749.3 -0.69399753
12/31/2018 5709.4 3.991662872
1/31/2019 5937.3 5.312178937
2/28/2019 6252.7 0.143937819
3/31/2019 6261.7 -100
8

2.
-1.44241677741402 1.30170496664196 -11.2755022582152 -4.03164774681803 -3.13092434078245
0.0000
0.0200
0.0400
0.0600
0.0800
0.1000
0.1200
0.1400
0.1600
0.1800
0.2000
AOSD
AOSD
3.
AOSD represent standard deviation among Australian listed ordinary share in the market and
Aoret represent Return from an ordinary share of 500 largest listed companies in ASX. Both
variables define the performance of share and business in the market and further identified the
profitable business among the market.
 AOSD and AOret are depended on the return value of stock in the market to the investor.
 Both the variable is interlinked with the performance of the business entity or the market
which provides a detailed analysis of the financial performance of the business and stock
of the particularcompany in the market.
 AOSD indicates a major differencebetween the return and Aoret defines the return value
of the business entity in ASX Market. This majorly impacts the financial decision of the
individual or investor to invest their money in the stock or security market.
9

Question 2
1.
Correlation analysis
Particular AOret AOSD
AOret 1 -0.004707651
AOSD -0.004707651 1
2.
3.
There is a negative correction among Aoret and AOSD which indicates that Return and standard
deviation on the security of the companies impact on the performance of each other (Taylor el.
Al, 2015). There is a correlation of 0.004707651 between the variable of the company which
indicates that both the variable is influenced by each other. A minor change in a variable can
impact on the result of other variables in the market.
10
1 11 21 31 41 51 61 71 81 91 101111121131141151161171181191201211221
-120
-100
-80
-60
-40
-20
0
20
Chart Title
AOret AOSD

Question 3
1.
Autocorrelation of AOret
Number of Data Point 228
Lag Autocorrelation U-Crit Value L-Crit Value
1 0.000461932 0.132453236 -0.132453236
2 0.000460988 0.132453236 -0.132453236
3 0.000436156 0.132453236 -0.132453236
4 0.000417427 0.132453236 -0.132453236
5 0.000420356 0.132453236 -0.132453236
6 0.000432896 0.132453236 -0.132453236
Autocorrelation of AOSD
Number of Data Point 228
Lag Autocorrelation U-Crit Value L-Crit Value
1 -0.006875118 0.132453236 -0.132453236
2 -0.011554569 0.132453236 -0.132453236
3 -0.014756935 0.132453236 -0.132453236
4 -0.010853324 0.132453236 -0.132453236
5 -0.011341047 0.132453236 -0.132453236
6 -0.006040193 0.132453236 -0.132453236
2.
Autocorrelation is calculated above for both variables above which indicate statically relations
among the variables. Aoret indicates autocorrelation of 0.000461932 on Lag one which defied
the significant relation of the variable on Lag one for the performance of security among the
market (Real-statistics. 2019). AOSD Also had autocorrelation of -0.006875118 which is
negative so that it indicates that there is a negative impact on the performance of share AOSD
rises. It indicates that the standard deviationamong the share is low in the market and had a
minimum impact on the return of the security of the business entity listed in the market.
11

Question 4
1.
2.
Correlation is the tool that identified the relationship between two variables for the study. In this
study, two variables are Return and Standar4d deviation for the market which determines the
performance of security in the market. As the global financial crisis happens in 2008 which
impacts the security market of Australia which is identified in the comparison of correlation
among the return and standard deviation of share before and after GFC (Wallstreetmojo. 2019).
In this, it is identified that Return and standard deviation had more relationships among the
variable which means GFC impact on the market and overcome the probability of return in the
market as standard deviation is increased in reference of return from security in the market.
12
Correlation analysis (Before GFC)
Particula
r AOret AOSD
AOret 1 -
0.004707651
AOSD
-
0.004707651 1
Correlation analysis ( After GFC)
Particular AUDSD
Aoret( afte
r)
AUDSD 1
Aoret( afte
r) 0.053886096 1