Financial Markets: Investment Risk, Return Measures & Analysis

This assignment focuses on calculating and analyzing investment risk measures within financial markets. It involves calculating monthly excess returns for various assets (S&P 500, Amazon, Johnson & Johnson, and several portfolios), determining average monthly excess returns, annualized excess returns, standard deviations, annualized standard deviations, and Sharpe ratios. The analysis aims to provide insights into the risk-reward profiles of different investment options. The assignment utilizes Excel functions to perform statistical calculations and interpret the results in the context of investment portfolio management. Desklib is a valuable resource for students seeking similar solved assignments and study tools.

Running head: FINANCIAL MARKET AND INSTITUTES
Financial Market and Institutes
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL MARKETS AND INSTITUTES
Table of Contents
Calculating Monthly Excess returns................................................................................................2
Average monthly excess return, annualized excess return, standard deviation, annualized
standard deviation, and Sharpe Ratio:.............................................................................................3
Bibliography....................................................................................................................................5

2FINANCIAL MARKETS AND INSTITUTES
Calculating Monthly Excess returns
S&P 500 Amazon Johnson P1 P2 P3 P4 P5 P6
4.30% 0.94% 4.12% 9.93% 9.93% 4.12% 4.12% 4.02% 4.02%
0.68% -7.11% 7.39% -2.34% -2.34% 7.39% 7.39% 7.39% 7.39%
0.61% -9.59% 3.11% -3.39% -3.39% 3.11% 3.11% 3.11% 3.11%
2.09% 2.76% 0.16% 4.85% 4.85% 0.16% 2.76% -0.04% 2.56%
1.90% 3.91% 3.83% 2.36% 2.36% 3.91% 3.91% 3.91% 3.91%
-1.52% -3.64% -4.34% -7.57% -7.57% -3.64% -3.64% -3.64% -3.64%
3.76% 8.31% 3.63% 10.36% 10.36% 8.31% 8.31% 8.31% 8.31%
-1.56% -4.90% 3.44% -6.33% -6.33% -4.90% 3.44% -5.10% 3.24%
2.31% -5.27% 1.11% -1.37% -1.37% 1.11% 1.11% 1.11% 1.11%
2.45% 10.85% 0.43% 7.88% 7.88% 0.43% 10.85% 0.23% 10.65%
-0.43% -8.36% -2.78% -10.62% -10.62% -8.36% -2.78% -8.56% -2.98%
-3.12% 14.22% -4.25% 11.17% 11.17% -4.25% 14.22% -4.45% 14.02%
5.47% 7.21% 2.35% -0.21% -0.21% 7.21% 7.21% 7.21% 7.21%
-1.76% -2.14% -1.19% -6.17% -6.17% -2.14% -1.19% -2.34% -1.39%
0.83% 13.33% -1.41% 7.74% 7.74% -1.41% 13.33% -1.61% 13.13%
1.03% 1.75% 0.93% -4.38% -4.38% 1.75% 1.75% 1.75% 1.75%
-2.12% 1.11% -1.98% -1.77% -1.77% 1.11% 1.11% 1.11% 1.11%
1.95% 23.49% 2.80% 13.62% 13.62% 23.49% 23.49% 23.49% 23.49%
-6.28% -4.36% -6.24% -16.32% -16.32% -4.36% -4.36% -4.36% -4.36%
-2.67% -0.22% 0.06% 5.49% 5.49% -0.22% 0.06% -0.42% -0.14%
8.27% 22.24% 8.20% 15.28% 15.28% 8.20% 22.24% 8.00% 22.04%
0.03% 6.19% 0.19% -10.47% -10.47% 6.19% 6.19% 6.19% 6.19%
-1.79% 1.63% 2.17% -1.27% -1.27% 1.63% 2.17% 1.43% 1.97%
-5.13% -13.20% 1.62% -7.58% -7.58% 1.62% 1.62% 1.62% 1.62%
-0.46% -5.92% 0.69% 3.32% 3.32% 0.69% 0.69% 0.69% 0.69%
6.56% 7.40% 3.54% 8.25% 8.25% 3.54% 7.40% 3.34% 7.20%
0.22% 11.06% 3.53% 1.68% 1.68% 11.06% 11.06% 11.06% 11.06%
1.49% 9.54% 0.50% -2.17% -2.17% 9.54% 9.54% 9.54% 9.54%
0.04% -1.04% 8.36% -1.34% -1.34% -1.04% 8.36% -1.24% 8.16%
3.52% 5.99% 3.20% 0.85% 0.85% 3.20% 5.99% 3.00% 5.79%
-0.16% 1.32% -4.74% -6.07% -6.07% 1.32% 1.32% 1.32% 1.32%
-0.17% 8.81% -0.40% 5.98% 5.98% 8.81% 8.81% 8.81% 8.81%
-1.99% -5.72% -1.86% -7.72% -7.72% -5.72% -1.86% -5.92% -2.06%
3.36% -5.02% -4.10% -0.85% -0.85% -4.10% -4.10% -4.10% -4.10%
1.76% 2.35% 4.17% 8.14% 8.14% 4.17% 4.17% 4.17% 4.17%
1.72% 7.06% -1.77% -0.65% -0.65% -1.77% 7.06% -1.97% 6.86%

3FINANCIAL MARKETS AND INSTITUTES
3.65% 2.55% 7.85% 2.42% 2.42% 2.55% 7.85% 2.35% 7.65%
-0.10% 4.85% 2.52% -1.50% -1.50% 2.52% 4.85% 2.32% 4.65%
0.83% 4.26% -0.95% -2.02% -2.02% 4.26% 4.26% 4.26% 4.26%
1.07% 7.44% 3.79% 3.81% 3.81% 7.44% 7.44% 7.44% 7.44%
0.39% -2.77% 3.74% -4.94% -4.94% -2.77% 3.74% -2.97% 3.54%
1.84% 1.95% 0.23% 0.50% 0.50% 0.23% 1.95% 0.03% 1.75%
-0.04% -0.83% -0.36% -1.76% -1.76% -0.83% -0.36% -1.03% -0.56%
1.83% -2.06% -1.26% -1.17% -1.17% -1.26% -1.26% -1.26% -1.26%
2.12% 14.87% 7.13% 12.76% 12.76% 7.13% 14.87% 6.93% 14.67%
0.26% 6.35% -0.17% -7.22% -7.22% 6.35% 6.35% 6.35% 6.35%
3.31% -0.74% 0.77% -3.10% -3.10% -0.74% 0.77% -0.94% 0.57%
5.48% 23.93% -1.23% 11.19% 11.19% -1.23% 23.93% -1.43% 23.73%
-4.04% 4.10% -6.16% -11.24% -11.24% 4.10% 4.10% 4.10% 4.10%
-2.85% -4.46% -0.86% -1.79% -1.79% -4.46% -0.86% -4.66% -1.06%
0.11% 8.04% -1.46% 5.95% 5.95% -1.46% 8.04% -1.66% 7.84%
1.99% 3.88% -5.60% -4.18% -4.18% 3.88% 3.88% 3.88% 3.88%
0.30% 4.13% 2.01% 3.78% 3.78% 4.13% 4.13% 4.13% 4.13%
3.42% 4.38% 9.03% 3.34% 3.34% 4.38% 9.03% 4.18% 8.83%
2.84% 13.05% 1.45% 0.32% 0.32% 1.45% 13.05% 1.25% 12.85%
0.23% -0.68% 3.07% -5.82% -5.82% -0.68% 3.07% -0.88% 2.87%
-7.14% -20.42% 1.11% -10.90% -10.90% 1.11% 1.11% 1.11% 1.11%
-2.49% -5.30% 1.22% 8.21% 8.21% 1.22% 1.22% 1.22% 1.22%
The annualized return is mainly calculated by subtracting the monthly returns of each
asset with the monthly T-bill.
Average monthly excess return, annualized excess return, standard deviation, annualized
standard deviation, and Sharpe Ratio:
Particulars
S&P
500
Amaz
on
Johns
on P1 P2 P3 P4 P5 P6
Average Excess return 0.66% 2.78% 1.04%
0.26
%
0.26
%
2.03
%
5.28
%
1.93
%
5.18
%
Annualized Excess
return 7.90%
33.41
%
12.48
%
3.10
%
3.10
%
24.31
%
63.32
%
23.13
%
62.14
%
Standard Deviation 6.17% 6.44% 6.13%
6.43
%
6.24
%
5.87
%
6.03
%
5.88
%
6.18
%
Annualized Standard
Deviation
21.39
%
22.32
%
21.22
%
22.29
%
21.61
%
20.32
%
20.88
%
20.38
%
21.41
%
Sharpe Ratio 0.37 1.50 0.59 0.14 0.14 1.20 3.03 1.13 2.90

4FINANCIAL MARKETS AND INSTITUTES
The average excess return of each asset is calculated by deriving the adding the total
returns and dividing it with the number of days. The annual excess returns are calculated by
multiplying the excess returns of each stock with 12. The standard deviation of each stock is
calculated with the help of excel function STDEV(). The annualized standard deviation is
calculated by multiplying the standard deviation with the square root of 12. Lastly, the Sharpe
ratio is calculated by dividing the annualized excess returns with the annualized standard
deviation.

5FINANCIAL MARKETS AND INSTITUTES
Bibliography
Andrianto, Y. and Diputra, Y., 2018. The Effect of Cryptocurrency on Investment Portfolio
Effectiveness. Journal of Finance and Accounting, 5(6), p.229.
Cambou, M. and Filipović, D., 2018. Replicating portfolio approach to capital
calculation. Finance and Stochastics, 22(1), pp.181-203.
Diserens, C., Fragnière, E., Holenstein, C. and Rufino, S., 2018. Paradoxes of Portfolio
Performance Calculation for Wealth Management: Avoiding Reporting Pitfalls. Journal of
Financial Risk Management, 7(03), p.205.