Multinational Finance and Investment
(a)Calculate each stock’s average monthly return, its return variance and standard deviation and beta over the period 07/2015 to 05/2020, using the price information of the FTSE All Share Index as a proxy for market portfolio.
Summarize your results in a table, and briefly describe how these are calculated.
(b)Construct three types of portfolios. Portfolio A consists of any 3 of the stocks, Portfolio B consists of any 6 of the stocks, and Portfolio C consists of all 10 stocks.
Assuming that each stock has equal weight in the portfolio, calculate Portfolio A, B, and C’s average monthly returns, return variances and standard deviations, and betas. Summarize your results in a table, and briefly describe how these are calculated.
(c)If you rank portfolio A, B and C according to their betas and return variances respectively, will the three portfolios have same ranking? Can you provide economic reasons as to why the two rankings should be (in)consistent with each other?
