This assignment comprises 15% of the assessment for ETF5952. This is an individual, NOT a syndicate assignment. Your assignment must be typed and you must submit a pdf file (A4 pages)

Academic Integrity/plagiarism: You can achieve academic integrity by honestly submitting work that is your own.  Presenting work that fails to ac- knowledge other people’s work within yours can compromise academic integrity. On the Assignment Cover Sheet, read the references to plagiarism and collusion from University Statute 4.1. Part III-Academic Misconduct.

Submission guidelines:  Submit one pdf file and one R script. Do attach R scripts or oR code in pdf file. Do not submit your assignment in a folder.

You should summarize what you obtain to answer questions. If you provide too many outputs relative to questions and we cannot find your answer exactly, your answer would be subject to point deduction.

Late Submission: Work submitted within 7 calendar days of a due (or an approved amended due) date may be accepted in exceptional circumstances. For each day that it is late, 10% of Assignment’s allocated marks will be deducted. Work submitted beyond 7 calendar days of a due date will be assessed as 0%.

This assignment should be answered based on the ’A1data.csv’which con- tains the following variables:

Mkt-RF: Excess return on market portfolio;

SMB: Size risk factor;

HML: Value risk factor;

RF: Risk-free rate;

MSFT: Continuously compounded returns of MSFT  (Microsoft Corpora- tion);

META: Continuously compounded returns of META (Meta Platforms, Inc.); TSLA: Continuously compounded returns of TSLA (Tesla, Inc.);

AMZN: Continuously compounded returns of AMZN (Amazon.com, Inc.); JNJ: Continuously compounded returns of JNJ (Johnson  Johnson);         JPM: Continuously compounded returns of JPM (JPMorgan Chase  Co.);

GS: Continuously compounded returns of GS (The Goldman Sachs Group, Inc.);

BA: Continuously compounded returns of BA (The Boeing Company);       KO: Continuously compounded returns of KO (The Coca-Cola Company): TMUS: Continuously compounded returns of TMUS (T-Mobile US, Inc.);  DIS: Continuously compounded returns of DIS (The Walt Disney Company);

PEP: Continuously compounded returns of PEP (PepsiCo, Inc.);

UL: Continuously compounded returns of UL (Unilever PLC).

You are employed as a financial advisor by a investment bank. One of your customers is seeking for professional financial advice from you.  He wants to invest in a well diversified portfolio. You are required to provide a professional report containing the following sections:

(a) In this Section, you need to construct Three portfolios based on the stocks given in the dataset. Discuss why you choose these stocks in the portfolios (no more than 150 words, it is an open-ended question) [15 marks].

(b) In this Section, you need to use statistical methods to construct and examine the optimal portfolios. Discuss your results (no more than 250 words) [25 marks].

(c) In this Section, you need to use statistical methods to analyse the returns and risks associated with these portfolios.  Discuss your results (no more than 300 words) [30 marks].

(d) Advise the best portfolio to your customer with reasoning. Discuss any possible limitation with the portfolio (no more than 100 words) [10 marks].

Please summarise your numerical results in table format  [5  marks].   Of most importance is a clear and concise presentation of a correct justification and analysis of your final answers.  Keep the explanations succinct, detailing only essential information. Marks will be deducted if your assignment is poorly written or unorganised [10 marks]. R codes should be submitted in a separate R script file, you need to make those codes are appropriate [5 marks].