Overview

.    Your summative coursework represents 100% of the final mark for the unit.

.    The coursework is in the form of a report and its supplementary files, e.g., R code and data files.

.     Penalties will apply if code/data files are missing or if the coursework is submitted late.

.    The coursework is an individual piece of work - you should work on this yourself and not as a

group. You will be required to make a plagiarism statement and your submission will be tested for originality.

.    The report should be submitted along with an R project folder (compressed) that is comprised of an R project file, an executable R script (it needs to be clearly commented), and any data used in your analysis.

.    The background and brief below give important information of the tasks you are expected to perform, read them carefully.

Coursework requirement

Part I (70%):

Background:

You are engaged by a global finance conglomerate to analyse and optimise the performance of their investment portfolios in the US stock market. The company has an equal-weighted diverse portfolio (rebalanced monthly) spanning various US stock sectors, including Retail Trade, Mining, and

Manufacturing (classified according to the Standard Industrial Classification Manual by the US

Government, seehttps://www.osha.gov/data/sic-manual). They are seeking your expertise to enhance their investment strategy.

The Task:

Using the given information and data from CRSP, write a report for your company that includes:

. A comprehensive review of the portfolio performance over the last five years, starting with a summary of the portfolio and its investment strategy:

o Choose appropriate evaluation metrics to review the portfolio.

o Include at least one benchmarking analysis, discuss and justify your choice of benchmark.

o Analyse the performance of different sectors within the portfolio over the last five years and identify trends and patterns that may explain the recent performance in overall portfolio returns.

•    A convincing assessment of the possibility of further diversifying the portfolio by including two more assets of your choice:

o You could consider assets that involve another stock sector, cryptocurrencies, or foreign exchange.

o This should be a mean-variance efficient portfolio with no short-selling positions.

o Does your portfolio generate alpha? If yes, why? If no, what recommendation would you give to the company?

Part II (30%):

What is the Capital Asset Pricing Theory? Does it hold for the cryptocurrency market?

•    Write a short (400 words) essay on the theory, including an introduction to the theory and an explanation of its key assumptions.

•    Outline the key steps in testing it on the cryptocurrency market.

•    Follow your outline and examine if the theory works well for cryptocurrencies, using coins that have data for at least the past 8 years on CoinMarketCap.com.

Other requirements:

o You are expected to produce at least two plots for each main bullet point in Part I, tables may be used at your discrepancy.

o You are expected to justify and critically discuss every decision you have made (e.g., the metric you choose to use to measure performance or alternative portfolio construction methods you would pursue).

o Proper academic citations and a reference list in the end are expected.

o The accompanying R script should be well commented. For example,the code should be divided into sections with comments explaining key steps.

o Use relative path where possible.

Marks will be awarded for:

•     Clarity and coherence of written report

•     Accuracy and completeness of data analysis

•     Executability of R code

•     Quality of data visualization

•     Clarity of commenting to R script

•     Proper citation of sources