Assignment Q.

1) Take the annual historical data of any two stocks and values for NIFTY 50 from NSEs website (www.nseindia.com) for the past 11 years. Convert the data into return series. 1. Identify the industries to which these companies belong to. 2. Calculate their arithmetic and geometric average return? Are they different? Give reasons for your answer. 3. Calculate the risk of each stock. 4. Calculate co-variance & correlation between these two stocks. Interpret the value of correlation coefficient in the light of portfolio analysis. 5. Which stock will you choose to invest in out of these two stocks & why? 6. Draw the mean-variance frontier on the graph where x-axis will indicate risk and y-axis will show return. Trace out the efficient frontier and locate the minimum variance portfolio on the same graph. 7. Calculate the risk & return of the minimum variance portfolio. Q.2) Take risk free rate as 4% per annum & answer the following questions: 1. Calculate alpha and beta for these two stocks & show the equation of their characteristic line. Interpret the meaning of calculated alpha and beta. Which of the two stocks is more exposed to systematic risk? 2. Calculate the required rate of return of these stocks using CAPM? Are they overvalued or undervalued? Give reasons. 3. Comment on the efficiency of these stocks using Capital Market Theory.