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This assignment involves completing three tasks in Excel: 1) Writing a VBA function to calculate the t-statistic for the slope coefficient from a linear regression. 2) Calculating the minimum variance portfolio from stock return data, plotting the security market line using an efficient portfolio and market index, and interpreting the results. 3) Writing a two-page report commenting on the assumptions made and interpreting the results. The assignment is due by 4pm on April 20th and late submissions will be penalized according to the specified late penalty scheme. Students should individually complete the assignment in Excel and Word files uploaded to MyPlace.

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shakeel ahmad
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201 views

Assignment PDF

This assignment involves completing three tasks in Excel: 1) Writing a VBA function to calculate the t-statistic for the slope coefficient from a linear regression. 2) Calculating the minimum variance portfolio from stock return data, plotting the security market line using an efficient portfolio and market index, and interpreting the results. 3) Writing a two-page report commenting on the assumptions made and interpreting the results. The assignment is due by 4pm on April 20th and late submissions will be penalized according to the specified late penalty scheme. Students should individually complete the assignment in Excel and Word files uploaded to MyPlace.

Uploaded by

shakeel ahmad
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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M.Sc. Finance, M.Sc.

Investment & Finance,


M.Sc. International Banking & Finance and
M.Sc. International Accounting & Finance
2019/2020
MS988 Financial Modelling with Excel
Assignment1

ANSWER ALL QUESTIONS

Submission Deadline: 4pm Monday 20th April 20202

Lecturer:
Dr Ashwin Arulselvan ([email protected])

This assignment has to be completed individually.


SUBMISSION REQUIREMENTS

The assignment submission must contain:


1) One excel files containing three sheets corresponding to the three tasks in question 2. Make
sure it is saved as xlsm file that contains the VBA function used to calculate the t-stat and any
other macros you use.
2) One two-page word document that comments on the results for question 3

All submission need to be on myplace

1
This assignment will account for 100% of the final mark for this class.
2
Late submission of coursework without an agreed extension is not permitted. The University employs a late
penalty scheme which is supportive of students and does not adversely impact on progression where the work is of a
pass standard. The following late penalty scheme of assessed work is applied. Out of a possible 100%, late
submission will incur the following penalties:
 1 day late: deduct 10 percentage points
 2 days late: deduct 15 percentage points
 3 days late: deduct 20 percentage points
 4 days late: deduct 25 percentage points
 After 5 days: deduct 100 percentage points, ie. a mark of zero is recorded.
Q1. Write a VBA function making use of Linest excel function to calculate t-statistics for the
slope.
Hint 1: You should combine the excel “index” function with the Linest function. The index
function takes as input an array, a row number and column number and returns the
element from the array corresponding to the row number and column number specified.
Hint 2: The t-stat for the slope is the (slope/standard error of slope)
(10 marks)

Q2. Download the monthly stock prices for the last 5 years of 20 stocks that you believe to be a
representative of the market. Assume risk-free rate as 0.5%.

a) If short sales is not allowed, calculate the return of the portfolio corresponding to
the least risk.
(25 marks)

b) Perform class exercise 1 in Lab sheet 4 to plot SML on the list of stocks you selected.
This involves in:
i. Calculating an efficient portfolio (without any restrictions on short sales)
ii. Estimating the betas for the individual assets with respect to the returns of the
efficient portfolio (step1 regression)
iii. Regressing the betas with the mean returns of the assets (step 2 regression).
Calculate t-stat using the VBA function you wrote in assignment 1, R-square,
slope and intercept.
(9+8+8=25 marks)

c) Now do task b-ii and b-iii using a suitable market index as a surrogate for the market
portfolio (where we assume this to be an efficient portfolio). You must download the
prices of the surrogate in order to do this.
(10+ 10 = 20 marks)

Q3. Write a two-page report commenting on the assumptions you have made and interpretting
the results from the 3 tasks in question 2.
(20 marks)

Grading criteria:
Q1: Correctly working excel function will get full marks. Partial marks will be
awarded for macro based codes and/or solution approach
Q2: Marks will be awarded to proper excel sheet setup and readability, correct codes
(with comments), correct implementation of the logic, suitable charts to view the
results
Q3: Explanation of the assumptions made in the Q2 modelling is expected (5 marks).
Proper financial interpretation of the results of Q2 tasks will fetch the remaining 15
marks. You may refer to the charts produced in the excel sheet.

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