RICHMOND THE AMERICAN INTERNATIONAL
UNIVERSITY IN LONDON
SCHOOL OF BUSINESS AND ECONOMICS
Assignment 2017 Tutor: Muhammad Almezweq
Submission date: Thursday 30th of November 2pm UK time Submission must be in word doc
The Assignment is 3500 words ∓ % All submission must be made online
This is individual work
Have look at London stock exchange index FTSE 250
(http://www.londonstockexchange.com/exchange/prices-and-
markets/stocks/indices/constituents-indices.html?index=UKX&industrySector=&page=1 ) or
FTSE 100 (http://www.londonstockexchange.com/exchange/prices-and-
markets/stocks/indices/constituents-indices.html?index=MCX&industrySector=&page=1 ).
You need to choose 10 firms from one index (FTSE 250 or FTSE 100) and from one of more
related sectors, such as bank and insurance, food and health and etc. Once you have chosen
your firms, you need to check where each firm has more than three years data, then download
daily closing prices for recent three years from yahoo finance
https://uk.finance.yahoo.com/quote/%5EFTMC/components?p=%5EFTMC or London stock
exchange website (http://www.londonstockexchange.com/home/homepage.htm ). You need
also to download monthly average risk free rate (Treasury bills – 3 month) from
(http://www.bankofengland.co.uk/boeapps/iadb/index.asp?Travel=NIxIRx&levels=1&XNote
s=Y&XNotes2=Y&Nodes=X4051X4052X4053X4058X3687X3764&SectionRequired=I&H
ideNums=-
1&ExtraInfo=true&A3765XBMX3687X3764.x=8&A3765XBMX3687X3764.y=3 ), and
either FTSE 100 or FTS 350 closing prices from London stock exchange website.
1- Calculate the daily return for your 10 firms and related index. Plot average and each firm returns against market return and comments on the shape, distribution and
correlation. Calculate the descriptive statistics and discuss the result.
(33.33 % of total marks)
2- Estimate the CAPM (Ei − r = βi (EM − r )), assuming the risk free rate is the same for all days over each month (assume the monthly rate as daily rate). Interpret
the result and comments on the reliability of the result by doing all diagnoses tests
3- Explain why it is more reasonable to use daily return rather than stock price based on
the properties of time series. This should be based on reasonable tests of time series of
return and stock prices regarding stationarity and forecasting based on your firms and
index.
(33.33 % of total marks)
