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BEO 2431

Risk Management Model


Case Study 1

Name:1.
2.

Yong Sze Yen


Lim Wee Shin

VU ID:(3922568)
(3922549)

Lecturer: Ms.Shakirah
Tutorial: T 2 (11.30 a.m. 12.30 p.m.)

Section 1: Distribution of Returns and Risk Measurement


Table of Returns
Date
Nov-87
Dec-87
Jan-88
Feb-88
Mar-88
Apr-88
May-88
Jun-88
Jul-88
Aug-88
Sep-88
Oct-88
Nov-88
Dec-88
Jan-89
Feb-89
Mar-89
Apr-89
May-89
Jun-89
Jul-89
Aug-89
Sep-89
Oct-89
Nov-89
Dec-89
Jan-90
Feb-90
Mar-90
Apr-90
May-90
Jun-90
Jul-90
Aug-90
Sep-90
Oct-90
Nov-90
Dec-90
Jan-91
Feb-91
Mar-91
Apr-91
May-91
Jun-91
Jul-91
Aug-91
Sep-91
Oct-91

(US$)

SP500

Return
ASX

TOPIX

FTSE

ST

-0.1646
-0.1006
-0.0871
-0.0851
-0.0843
-0.0784
-0.0744
-0.0707
-0.0695
-0.0693
-0.0690
-0.0686
-0.0560
-0.0548
-0.0525
-0.0506
-0.0488
-0.0486
-0.0464
-0.0433
-0.0425
-0.0418
-0.0414
-0.0406
-0.0405
-0.0395
-0.0388
-0.0383
-0.0381
-0.0380
-0.0374
-0.0356
-0.0331
-0.0325
-0.0325
-0.0319
-0.0302
-0.0302
-0.0301
-0.0297
-0.0294
-0.0291
-0.0276
-0.0274
-0.0266
-0.0266
-0.0261

-0.1693
-0.0289
-0.0821
-0.0718
0.0122
-0.0819
-0.0909
-0.0856
-0.0626
0.0207
-0.1456
-0.0642
0.0352
-0.0535
-0.0048
-0.0065
0.0225
-0.0167
-0.0050
0.0615
0.0282
0.0129
-0.0241
0.0159
-0.0190
-0.0923
-0.0150
0.0312
-0.0441
-0.0100
-0.0201
0.0180
0.0444
0.0300
0.0504
0.1118
-0.0060
0.0111
-0.0787
0.0391
-0.0218
0.0562
-0.0682
-0.0163
0.0387
0.0003
0.0024

-0.1267
-0.0426
-0.0784
-0.0670
0.0319
-0.0690
-0.1042
-0.0486
-0.0730
-0.0509
-0.0828
-0.0541
0.0193
0.0003
-0.0133
-0.0501
0.0327
-0.0041
-0.0414
-0.0004
-0.0194
0.0168
-0.0439
0.0617
-0.0167
-0.0045
-0.0252
0.0084
-0.0327
0.0010
0.0129
0.0211
0.0000
0.0309
0.0281
0.0274
-0.0388
0.0425
-0.0404
-0.0121
-0.0112
0.0144
0.0164
-0.0181
-0.0156
0.0144
-0.0397

-0.2026
-0.0077
-0.1072
-0.0113
-0.0372
-0.0738
-0.1340
-0.0766
-0.1056
-0.0253
-0.1236
0.0293
0.0195
-0.0275
-0.0613
0.1821
0.0096
0.0059
-0.0476
-0.0660
0.0537
-0.0569
0.1366
-0.0609
0.0000
-0.0453
-0.0015
0.0228
-0.0535
-0.0399
0.0061
0.0441
-0.0204
0.0123
0.0077
-0.0541
-0.0838
0.0407
-0.0575
0.0114
-0.0768
-0.0500
-0.0499
-0.0871
0.0009
0.0044
-0.0238

-0.1071
-0.0240
-0.0656
-0.0493
0.0416
-0.0826
-0.1304
-0.0643
-0.0728
0.0237
-0.1006
-0.0482
-0.0020
-0.0569
0.0232
0.0313
0.0099
0.0239
-0.0070
0.0385
-0.0121
-0.0088
-0.0357
0.0630
-0.0098
-0.0602
-0.0557
-0.0175
-0.0430
-0.0201
-0.0055
0.0077
-0.0022
0.0339
0.0207
0.0301
-0.0310
0.0300
-0.0879
0.0416
0.0051
0.0239
-0.0354
0.0085
0.0052
0.0195
0.0411

-0.0343
0.0735
0.0301
0.0675
-0.1391
0.0366
-0.2394
-0.0868
0.0382
-0.0486
0.0972
0.0290
0.0223
-0.0103
-0.0123
-0.0411
-0.0484
-0.0290
-0.0208
-0.0094
-0.0028
0.0923
-0.0199
-0.1764
-0.1500
-0.1403
0.0227
-0.0106
-0.0111
0.0465
0.0057
0.0292
-0.0788
0.0235
0.0157
0.0357
0.0467
0.0305
-0.0132
0.0042
0.1353
0.0254
0.0232
0.0471
-0.0414
0.0041
0.0592

Nov-91
Dec-91
Jan-92
Feb-92
Mar-92
Apr-92
May-92
Jun-92
Jul-92
Aug-92
Sep-92
Oct-92
Nov-92
Dec-92
Jan-93
Feb-93
Mar-93
Apr-93
May-93
Jun-93
Jul-93
Aug-93
Sep-93
Oct-93
Nov-93
Dec-93
Jan-94
Feb-94
Mar-94
Apr-94
May-94
Jun-94
Jul-94
Aug-94
Sep-94
Oct-94
Nov-94
Dec-94
Jan-95
Feb-95
Mar-95
Apr-95
May-95
Jun-95
Jul-95
Aug-95
Sep-95
Oct-95
Nov-95
Dec-95
Jan-96
Feb-96
Mar-96
Apr-96

-0.0257
-0.0257
-0.0253
-0.0248
-0.0244
-0.0241
-0.0240
-0.0239
-0.0238
-0.0237
-0.0235
-0.0235
-0.0228
-0.0225
-0.0221
-0.0217
-0.0216
-0.0214
-0.0208
-0.0207
-0.0203
-0.0202
-0.0199
-0.0199
-0.0198
-0.0198
-0.0193
-0.0188
-0.0184
-0.0181
-0.0175
-0.0175
-0.0175
-0.0170
-0.0168
-0.0165
-0.0163
-0.0162
-0.0162
-0.0162
-0.0156
-0.0154
-0.0153
-0.0148
-0.0147
-0.0145
-0.0143
-0.0138
-0.0138
-0.0137
-0.0134
-0.0133
-0.0132
-0.0131

0.0145
0.0495
0.0585
0.0358
0.0140
-0.0309
-0.0567
-0.0508
0.0244
-0.0459
-0.0192
0.0228
0.0178
-0.0345
0.0359
0.0163
-0.0062
0.0199
0.0432
-0.0356
0.0093
-0.0458
-0.0098
0.0532
0.0111
0.0180
0.0246
0.0300
0.0346
0.0075
-0.1099
-0.0133
-0.0214
0.0005
-0.0177
0.0497
-0.0110
-0.0250
0.0397
-0.0750
0.0271
-0.0164
0.0234
0.0080
-0.0022
-0.0574
0.0967
0.0428
0.0626
0.0076
0.0348
-0.0175
-0.0198
0.0353

0.0109
0.0518
0.0494
0.0486
0.0182
-0.0054
-0.0289
-0.0181
-0.0429
-0.0583
-0.0151
0.0019
0.0362
-0.1091
-0.0146
0.0314
-0.0225
0.0110
0.0440
-0.0303
0.0066
-0.0277
-0.0456
0.0671
0.0775
0.0250
0.0076
0.0154
0.0640
0.0252
-0.0478
-0.0238
0.0151
-0.0018
-0.0390
0.0174
0.0132
-0.0648
-0.0177
-0.0684
-0.0068
0.0161
0.0060
-0.0620
-0.0167
-0.0519
-0.0010
-0.0077
0.0014
-0.0142
0.0424
-0.0197
-0.0170
0.0392

0.0311
-0.0015
0.0325
-0.0782
0.0237
-0.0335
-0.0845
-0.0081
-0.0612
-0.0414
0.0044
0.0135
0.0806
-0.0799
-0.0586
0.0403
-0.0152
-0.0071
0.0443
-0.0626
-0.0235
-0.0749
-0.0118
-0.0279
0.0303
0.0664
-0.0148
0.0339
0.0209
-0.0182
-0.0221
-0.0143
-0.0588
-0.0294
0.0221
-0.0163
0.0547
-0.0298
0.0071
-0.0380
-0.0308
0.0897
0.0344
-0.0627
0.0620
-0.0752
-0.0071
0.0252
0.0380
-0.0066
0.0135
-0.1020
-0.0042
0.0636

0.0012
0.0652
0.0415
0.0057
-0.0028
-0.0324
-0.0722
-0.0956
-0.0238
-0.0728
-0.0151
-0.0065
0.0425
-0.0768
0.0320
0.0308
0.0024
0.0137
-0.0037
-0.0356
-0.0007
-0.0017
-0.0381
0.0890
-0.0213
0.0010
0.0094
0.0452
0.0593
0.0025
-0.1197
-0.0131
0.0148
0.0056
-0.0293
0.0286
0.0028
-0.0497
-0.0066
-0.0201
0.0427
-0.0239
0.0148
-0.0349
-0.0261
-0.0183
0.0492
0.0421
0.0373
-0.0136
0.0121
-0.0689
0.0318
0.0198

0.0912
-0.0599
-0.0375
-0.0158
-0.0068
-0.1705
-0.0728
-0.0492
0.0208
0.1035
-0.0076
-0.0532
-0.0526
0.0470
-0.0391
0.0259
-0.0450
0.0115
-0.0105
0.0276
-0.1597
0.0197
-0.0648
-0.1886
0.0328
0.0197
0.0517
0.0376
0.0001
0.1006
0.0821
-0.0125
-0.0001
0.0207
0.0377
-0.0834
0.0131
0.1386
-0.0023
0.0167
-0.0104
-0.0091
-0.0443
0.0200
0.0144
0.0826
0.0148
0.0459
0.0928
0.0273
-0.0220
-0.0198
-0.0342
0.0205

May-96
Jun-96
Jul-96
Aug-96
Sep-96
Oct-96
Nov-96
Dec-96
Jan-97
Feb-97
Mar-97
Apr-97
May-97
Jun-97
Jul-97
Aug-97
Sep-97
Oct-97
Nov-97
Dec-97
Jan-98
Feb-98
Mar-98
Apr-98
May-98
Jun-98
Jul-98
Aug-98
Sep-98
Oct-98
Nov-98
Dec-98
Jan-99
Feb-99
Mar-99
Apr-99
May-99
Jun-99
Jul-99
Aug-99
Sep-99
Oct-99
Nov-99
Dec-99
Jan-00
Feb-00
Mar-00
Apr-00
May-00
Jun-00
Jul-00
Aug-00
Sep-00
Oct-00

-0.0130
-0.0128
-0.0127
-0.0126
-0.0120
-0.0118
-0.0116
-0.0115
-0.0114
-0.0113
-0.0109
-0.0107
-0.0100
-0.0097
-0.0095
-0.0082
-0.0076
-0.0073
-0.0070
-0.0069
-0.0069
-0.0068
-0.0067
-0.0067
-0.0061
-0.0059
-0.0056
-0.0055
-0.0055
-0.0055
-0.0049
-0.0046
-0.0045
-0.0044
-0.0043
-0.0040
-0.0038
-0.0036
-0.0030
-0.0029
-0.0025
-0.0020
-0.0015
-0.0011
-0.0006
-0.0005
-0.0004
-0.0004
0.0003
0.0008
0.0010
0.0014
0.0014
0.0019

0.0597
0.0409
0.0607
0.0216
0.0401
0.0286
0.0025
-0.0315
0.0106
-0.0134
0.0191
0.0122
-0.0313
-0.0323
-0.0268
-0.0199
-0.0474
0.0217
-0.0011
0.0007
0.0584
0.0239
-0.0108
-0.0370
0.0396
-0.0253
0.0181
-0.0085
0.0358
-0.0155
-0.0250
-0.0727
0.0070
-0.0262
-0.0271
0.0212
0.0883
-0.0116
0.0086
0.0325
0.0175
0.0165
0.0246
0.0286
0.0264
0.0008
0.0327
0.0784
0.0672
0.0088
0.0509
-0.0046
-0.0438
0.0574

-0.0053
0.0410
0.0145
0.0270
-0.0470
0.0461
-0.0106
0.0172
0.0461
-0.0488
0.0551
0.0173
0.0164
-0.0048
-0.0447
0.0296
-0.0200
-0.0015
0.0276
0.0006
0.0273
-0.0235
-0.0473
-0.0618
-0.0164
0.0138
0.0453
-0.0295
0.0259
0.0123
0.0328
-0.0468
0.0317
-0.0664
-0.0438
0.0259
0.0743
0.0139
0.0300
0.0240
0.0204
-0.0207
-0.0303
0.0149
0.0262
0.0133
0.0390
0.0033
0.0635
-0.0401
0.0495
0.0486
-0.0452
0.0125

-0.1102
0.0504
0.0406
0.0053
0.1116
-0.0709
0.0196
0.0441
0.0387
-0.1574
0.0499
-0.0395
-0.0230
-0.0046
-0.0052
0.0071
-0.0531
-0.0456
0.0745
-0.0350
0.0492
-0.1318
-0.0840
-0.0057
-0.0140
-0.0030
0.1256
-0.0373
0.0236
-0.0588
-0.0079
-0.0851
0.0998
-0.0101
-0.0391
0.0397
0.0729
0.0254
-0.0381
0.0326
0.0643
0.0509
0.0493
-0.0077
-0.0479
0.0447
0.0220
-0.0056
0.1459
-0.0538
0.0927
-0.0392
-0.0826
-0.0620

0.0481
0.0383
0.0481
0.0315
0.0451
0.0879
-0.0097
-0.0139
0.0137
-0.0014
0.0548
-0.0134
-0.0314
0.0473
-0.0173
0.0071
-0.0061
-0.0019
0.0360
0.0211
0.0288
-0.0029
-0.0198
-0.0412
-0.0485
0.0080
0.0030
0.0037
0.0327
-0.0099
-0.0266
-0.0843
0.0055
-0.0648
-0.0692
-0.0040
0.0688
0.0007
-0.0117
0.0266
0.0070
0.0620
-0.0030
0.0318
0.0060
0.0202
0.0192
0.0656
0.0967
0.1038
0.0640
-0.0208
-0.0568
0.0289

0.0436
0.0650
-0.0702
0.0423
-0.0221
0.0400
-0.0803
-0.0133
0.0117
0.1572
0.1084
0.0276
0.0459
0.0754
-0.0083
0.0104
0.0499
0.0302
0.0276
0.0034
0.0305
-0.0776
-0.0282
0.0020
-0.0505
0.0110
-0.0169
-0.1437
-0.0328
-0.0399
-0.0350
-0.0287
0.0365
0.0653
0.0199
0.0348
-0.0119
-0.1952
0.0107
0.0106
0.0806
0.0496
0.0974
0.0497
0.0504
-0.0286
-0.0044
-0.0821
0.0214
0.0266
-0.0039
-0.1781
0.0164
0.0606

Nov-00
Dec-00
Jan-01
Feb-01
Mar-01
Apr-01
May-01
Jun-01
Jul-01
Aug-01
Sep-01
Oct-01
Nov-01
Dec-01
Jan-02
Feb-02
Mar-02
Apr-02
May-02
Jun-02
Jul-02
Aug-02
Sep-02
Oct-02
Nov-02
Dec-02
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Jul-03
Aug-03
Sep-03
Oct-03
Nov-03
Dec-03
Jan-04
Feb-04
Mar-04
Apr-04
May-04
Jun-04
Jul-04
Aug-04
Sep-04
Oct-04
Nov-04
Dec-04
Jan-05
Feb-05
Mar-05
Apr-05

0.0019
0.0019
0.0021
0.0024
0.0025
0.0026
0.0028
0.0030
0.0034
0.0035
0.0036
0.0039
0.0039
0.0043
0.0049
0.0051
0.0064
0.0070
0.0072
0.0077
0.0078
0.0078
0.0080
0.0082
0.0084
0.0084
0.0084
0.0084
0.0086
0.0092
0.0093
0.0094
0.0095
0.0096
0.0096
0.0097
0.0099
0.0100
0.0106
0.0108
0.0109
0.0119
0.0122
0.0122
0.0125
0.0126
0.0132
0.0134
0.0135
0.0135
0.0138
0.0140
0.0141
0.0141

0.0542
0.0323
-0.0051
0.0050
-0.1100
0.0284
-0.0184
-0.0388
0.0210
0.0400
0.0024
-0.0540
0.0207
0.0375
-0.0075
0.0030
0.0097
-0.0861
0.0062
-0.0612
0.0704
0.0133
0.0125
-0.0256
0.0100
0.0123
0.0009
0.0424
-0.0246
-0.0082
-0.0295
0.0196
-0.0483
0.0592
-0.0603
0.0367
0.0047
-0.0321
0.0000
0.0191
0.0387
-0.0201
0.0445
0.0124
-0.0310
-0.0512
-0.0048
0.0570
0.0085
0.0338
-0.0426
0.0320
-0.0344
-0.0066

0.0093
0.0305
-0.0290
0.0150
-0.0554
0.0750
-0.0212
-0.0254
0.0007
0.0014
0.0048
-0.0289
0.0079
0.0291
0.0143
-0.0024
-0.0055
-0.0778
0.0174
-0.1088
0.0151
0.0409
0.0343
0.0090
0.0704
0.0272
0.0623
-0.0048
-0.0518
-0.0059
-0.0567
-0.0204
-0.0026
0.0476
-0.0176
0.0172
0.0110
-0.0209
0.0419
-0.0177
0.0302
-0.0309
0.0438
0.0116
-0.0489
-0.0736
0.0367
0.0059
-0.0153
0.0554
-0.0114
0.0367
0.0008
-0.0153

0.0551
0.0457
-0.0181
-0.0406
-0.0480
0.0186
0.0124
-0.0436
0.0343
0.0073
-0.0091
-0.0453
0.0055
0.0021
-0.0588
0.0537
-0.0468
-0.0628
-0.0346
-0.0881
0.0041
0.0466
0.0486
0.1320
-0.0118
0.0331
-0.0044
0.0841
-0.0038
-0.0342
0.0011
-0.0681
-0.0741
0.1055
-0.0563
-0.0209
-0.0251
-0.0391
0.0288
0.0505
0.1316
-0.0440
0.0219
0.0251
-0.0798
-0.2046
0.0191
0.0362
0.0000
0.0164
-0.0125
-0.0218
-0.0423
0.0379

0.0227
0.0237
0.0055
-0.0287
-0.0770
0.0253
-0.0075
-0.0543
0.0095
0.0092
0.0102
-0.0525
0.0234
0.0549
-0.0052
0.0145
-0.0042
-0.0705
0.0276
-0.0893
0.0565
0.0319
0.0283
-0.0231
0.0247
0.0234
0.0122
-0.0120
-0.0645
0.0172
-0.0467
0.0215
-0.0334
0.0564
-0.0550
0.0228
-0.0045
-0.0376
0.0302
-0.0147
0.0194
-0.0188
0.0719
-0.0056
-0.0498
-0.0803
-0.0023
0.0318
0.0121
0.0651
0.0010
0.0558
-0.0115
-0.0404

-0.0432
0.0146
0.0098
0.0419
0.0659
0.0517
0.0221
-0.0015
-0.0122
-0.0059
0.0346
0.0537
-0.0575
0.0086
-0.0692
0.0316
-0.0427
-0.0061
0.0095
0.0150
0.0085
-0.0343
0.0468
0.0621
0.0628
-0.0157
0.0002
0.0416
0.0592
0.0494
-0.1118
-0.0500
-0.0047
-0.0168
-0.0370
0.0007
-0.0915
-0.0436
0.0632
0.0025
0.2423
0.0172
-0.0342
-0.0697
0.0216
0.0503
-0.0934
-0.0363
0.0984
0.0307
-0.0331
0.0482
0.0141
-0.0312

May-05
Jun-05
Jul-05
Aug-05
Sep-05
Oct-05
Nov-05
Dec-05
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09

0.0143
0.0145
0.0147
0.0150
0.0152
0.0153
0.0154
0.0158
0.0162
0.0164
0.0166
0.0167
0.0168
0.0168
0.0169
0.0171
0.0175
0.0181
0.0182
0.0183
0.0183
0.0187
0.0190
0.0192
0.0193
0.0194
0.0194
0.0200
0.0205
0.0206
0.0207
0.0207
0.0208
0.0210
0.0227
0.0230
0.0233
0.0236
0.0237
0.0238
0.0239
0.0241
0.0241
0.0242
0.0245
0.0245
0.0246
0.0248
0.0252
0.0252
0.0254
0.0254
0.0255
0.0259

0.0210
0.0186
0.0360
0.0420
-0.0616
-0.0802
0.0150
0.0242
0.0540
0.0227
0.0111
-0.0051
-0.0010
0.0408
-0.0210
0.0474
0.0153
0.0059
0.0863
0.0000
-0.0224
-0.0184
0.0107
0.0172
0.0068
0.0093
0.0446
-0.0215
0.0165
0.0740
0.0083
-0.0218
0.0190
0.0432
0.0072
0.0186
0.0113
0.0254
0.0730
0.0107
0.0411
0.0318
0.0101
0.0918
0.0732
0.0432
-0.0288
0.0206
0.0105
0.0067
0.0578
0.0102
0.0004
-0.0091

0.0236
0.0354
-0.0270
0.0328
-0.0190
0.0061
-0.0142
0.0165
0.0238
-0.0220
0.0063
0.0610
0.0012
0.0084
-0.0144
0.0446
0.0789
0.0107
0.0242
0.0080
-0.0192
0.0143
0.0821
-0.0085
0.0436
0.0315
0.0395
-0.0397
0.0182
0.0731
-0.0279
0.0104
0.0161
0.0414
-0.0263
0.0408
0.0053
0.0351
0.0166
0.0107
0.0288
0.0164
0.0278
0.0544
-0.0083
0.0285
-0.0241
-0.0168
0.0537
0.0004
0.0358
0.0153
0.0359
-0.0073

0.0184
0.1147
0.0604
-0.0130
0.0213
-0.0126
0.0071
0.0071
0.0922
-0.0192
0.0255
0.0505
-0.0874
0.1055
0.0446
0.1200
-0.0092
0.0126
-0.0640
0.0674
-0.0881
0.0581
0.0480
0.0033
0.1119
-0.0230
0.0000
-0.0102
-0.0086
0.0224
0.0489
0.0181
0.0272
-0.0071
-0.0415
-0.0263
0.0787
0.0368
0.0078
0.0357
0.0351
0.0457
-0.0227
0.1046
-0.0657
-0.0071
0.0345
0.0092
-0.0107
-0.0323
0.0486
0.0782
0.0347
-0.0377

0.0640
0.0037
0.0077
0.0130
-0.0203
-0.0459
-0.0223
0.0053
0.0148
-0.0185
0.0125
0.0089
-0.0139
0.0332
-0.0124
0.0677
0.0392
0.0075
0.0858
0.0037
-0.0477
-0.0089
0.0799
-0.0196
0.0344
0.0250
0.0418
-0.0220
-0.0133
0.0848
-0.0075
-0.0052
0.0239
0.0461
0.0130
0.0440
-0.0042
0.0252
0.0199
-0.0056
0.0026
0.0223
0.0222
0.1152
0.0841
0.0224
-0.0347
0.0364
0.0214
-0.0086
0.0504
0.0630
-0.0383
0.0128

0.0228
0.0691
0.0182
0.1517
-0.0310
-0.0130
-0.0746
-0.0072
-0.0101
-0.0157
-0.0063
0.1104
0.0215
0.0055
0.0511
0.0142
0.0142
-0.0559
-0.0491
-0.0124
0.0366
0.0342
-0.0357
0.0218
-0.0383
-0.0020
-0.0107
-0.0953
0.0519
-0.0249
0.0119
0.0409
0.0104
0.0250
0.0295
0.0110
0.0766
0.0290
0.0131
-0.0768
-0.0114
0.0317
0.0402
-0.0171
0.1041
0.0446
0.0125
0.0585
0.0023
-0.0210
-0.1005
0.2822
0.1398
0.0182

Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14

0.0264
0.0264
0.0267
0.0283
0.0289
0.0291
0.0292
0.0294
0.0295
0.0303
0.0306
0.0321
0.0322
0.0329
0.0330
0.0333
0.0340
0.0360
0.0392
0.0392
0.0405
0.0405
0.0408
0.0409
0.0421
0.0428
0.0438
0.0439
0.0441
0.0446
0.0469
0.0474
0.0477
0.0485
0.0486
0.0513
0.0535
0.0535
0.0542
0.0543
0.0545
0.0548
0.0567
0.0570
0.0597
0.0598
0.0599
0.0614
0.0627
0.0636
0.0649
0.0655
0.0744
0.0746

-0.0333
0.0181
0.0089
0.0316
-0.0170
0.0754
0.0586
0.0370
-0.0177
0.0049
0.0069
0.0810
0.0194
0.0126
-0.0945
0.0125
-0.0392
0.0550
0.0713
-0.0274
0.0297
0.0768
0.0505
-0.0197
0.0386
0.0315
0.0239
0.0142
0.0149
0.0621
0.0508
0.0436
0.0396
0.0380
0.0356
-0.0089
0.0802
0.0122
0.0077
0.0689
0.0267
0.0284
0.0652
0.0940
-0.0641
0.0318
0.0040
0.0038
-0.0121
-0.0189
0.0854
-0.0347
0.1077
0.0356

0.1311
0.0656
0.0297
0.0446
-0.0528
0.0271
0.0513
0.0003
-0.0062
-0.0173
-0.0019
0.0426
0.0754
0.0425
-0.0419
0.0077
-0.0753
0.0322
0.0430
-0.0166
0.0164
0.0578
0.0358
-0.0213
0.0402
0.0491
0.0747
0.0311
0.0283
0.0427
0.0010
0.0508
0.0047
0.0452
0.0592
0.0072
0.0232
0.0251
-0.0056
0.0446
0.0226
-0.0031
0.0351
0.0556
-0.0147
0.0630
-0.0211
0.0755
-0.0094
-0.0731
0.0709
-0.0138
0.0721
0.0514

0.0334
0.0356
0.0194
0.0043
-0.0042
-0.0082
0.0950
0.0444
0.0109
-0.0087
-0.0072
0.0110
0.0021
-0.0428
-0.1232
0.0486
-0.0405
0.0238
0.0464
-0.0247
0.0799
0.0692
0.0433
-0.0171
0.0128
0.1174
0.0456
-0.0157
0.0021
-0.0564
0.0523
0.0381
0.0699
0.0547
-0.0575
0.0353
-0.0083
-0.0070
0.0312
0.0103
0.0024
-0.0200
0.0423
0.0830
-0.0728
0.1325
-0.0585
-0.0277
0.0173
0.0595
0.0229
-0.0155
0.0046
0.0043

-0.0145
0.0275
0.0344
0.0284
0.0252
0.0328
0.0608
0.0336
-0.0019
0.0162
-0.0312
0.0866
0.0438
0.0115
-0.0700
-0.0494
-0.0048
0.0477
0.1434
-0.0947
0.0077
0.0594
0.0311
-0.0171
0.0172
0.0453
-0.0074
0.0117
0.0394
-0.0351
0.0311
0.0196
0.0471
0.0409
0.0459
-0.0158
0.0736
0.0097
0.0340
0.0693
0.0141
0.0272
0.0675
0.0808
-0.0333
0.0213
0.0129
-0.0107
-0.0165
-0.0324
0.0252
0.0007
0.0811
0.0258

0.0428
0.0809
0.0351
0.0506
-0.0047
0.0981
0.0302
-0.0432
-0.0002
0.0151
0.0239
0.0528
-0.0030
-0.0036
-0.1402
-0.0249
-0.0011
-0.0056
-0.0221
-0.0136
0.0135
-0.0381
0.0475
0.0305
0.0190
-0.0045
0.0065
0.0237
-0.0747
0.2820
0.0733
0.0301
0.0549
0.0094
-0.0080
-0.0711
0.1759
-0.0869
-0.0086
-0.0125
-0.0325
-0.0040
-0.0032
0.2129
-0.1850
0.0015
0.0335
0.0940
0.0570
0.0329
0.1296
-0.0063
-0.0537
0.0268

May-14
Jun-14

0.0840
0.0891

0.0875
0.0530

0.0406
0.0098

(a)Countries return over time period

0.0302
0.0725

0.0619
0.0409

0.0145
0.0017

US$
0.15
0.1
0.05
Return

(US$)

0
-0.05
-0.1
-0.15
-0.2

As projected in the graph, the exchange rate for United State Dollars (US$)
during the year of 2006 2011 encounter a high volatility in exchange rate
prices, and it also indicated a low clustering in their exchange rate prices.
Meanwhile, in the year of 1990 1997 the exchange rate a lowly volatile and it is
being highly clustered during that period.

SP500
0.15
0.1
0.05
0

SP500

Return
-0.05
-0.1
-0.15
-0.2

SP500 indicates the returns of share price for the United States. It has shown in
the graph that the returns of SP500 experienced high volatility during year 2007
2009 which also indicates a low clustering in the returns. On the other hand,
there is a low volatility in the returns during year 1992 1995 which as well
indicates a higher clustering. Furthermore, the returns have shown a significant
drop of -0.1693 during October 2008 due to a market crash.

ASX
0.15
0.1
0.05
Return

ASX

0
-0.05
-0.1
-0.15

The diagram above shows


(-0.1267) Oct 2008 Market Crash

TOPIX
0.25
0.2
0.15
0.1
0.05
Return

0
-0.05
-0.1
-0.15
-0.2
-0.25

TOPIX

(-0.2046) Sep 1990 Market Crash

FTSE
0.2
0.15
0.1
FTSE

0.05
Return
0
-0.05
-0.1
-0.15

The returns for FTSE have shown a significant drop in the returns of -0.1304
during September 2008 due to the happening of a market crash in that period.
During year 2007 2009, the returns are highly volatile which also indicates a
low clustering. However, there is a low volatility in the returns for FTSE during
year 2003 2005 which also means more clustered.
(-0.1304) Sep 2008 Market Crash

ST
0.4
0.3
0.2
0.1
Return
0
-0.1
-0.2
-0.3

ST

There is a high volatility in the returns for ST during year 1997 2001 which also
indicates a low clustering. Due to a market crash in September 2008, the returns
for ST experience a down fall of -0.2394. The returns for ST then experience a
low volatility during year 2010 2013 which is more clustered.

(b)Summary Descriptive Statistics


US$
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count

Arithmetic Mean
Geometric Mean
Cumulative Wealth Index
Standard Deviation
Skewness
Kurtosis
Coefficient of Variation (CV)
The probability of obtaining
negative return

0.0014
0.0018
0.0025
#N/A
0.0322
0.0010
2.2744
0.5627
0.2536
0.1646
0.0891
0.4567
319

SP500

ASX

TOPIX

FTSE

0.0076
0.0023
0.0111
0
0.0420
0.0018
1.2278

0.0051
0.0022
0.0090
#N/A
0.0386
0.0015
0.3445

0.0004
0.0032
0.0009
0
0.0565
0.0032
0.8744

0.0054
0.0024
0.0077
#N/A
0.0421
0.0018
0.5136

0.0065
0.0037
0.0106
#N/A
0.0655
0.0043
3.4170

-0.6122
0.2811

-0.3680
0.2578

-0.1023
0.3867

-0.2742
0.2738

0.0606
0.5216

-0.1693
0.1118
2.4326
319

-0.1267
0.1311
1.6420
319

-0.2046
0.1821
0.1314
319

-0.1304
0.1434
1.7373
319

-0.2394
0.2822
2.0652
319

ST

US$
0.1432%
0.0908%
1.3358
3.2149%
-0.05627
2.274
22.4569

SP500
0.7626%
0.6737%
8.5165
4.1889%
-0.6122
1.228
5.4931

ASX
0.5147%
0.4400%
4.0571
3.8543%
-0.368
0.345
7.4880

TOPIX
0.0412%
-0.1192%
0.6836
5.6382%
-0.1023
0.874
136.8946

FTSE
0.5446%
0.4560%
4.2687
4.2001%
-0.02742
0.514
7.7121

ST
0.6474%
0.4327%
3.9649
6.5422%
0.0606
3.417
10.1052

48%

43%

45%

50%

45%

46%

Explanation:
Arithmetic mean: It is the mean where it shows an average value of all data in
order to measure the average performance. In relation to the case, 0.7626% is
the highest arithmetic mean from SP500 share price index. Meanwhile, the
lowest mean of share price index would be 0.0412% from TOPIX.
Geometric mean:It is said to be the compounded rate of return over time
period. This can be used to measure the changes in wealth overtime and
showing the growth pattern of money over a specific time period. Besides that, it
is also being used in assisting finance and investments to monitor the stable
growth in investment funds over the specific past period of time. As shown in the
table, 0.6737% of SP500 share price is the highest among all geometric means,
meanwhile, (-0.1192%) from TOPIX is the lowest geometric means among all
share prices.
Cumulative Wealth Index: With an initial wealth and a given series of return
on some asset, it creates a cumulative effect over time. From the data above, it
is shown that SP500 has the highest cumulative wealth index in compared to
TOPIX which has the lowest level of cumulative wealth index of 0.6836.
Standard Deviation: A measure of dispersion of a set of data from its mean.
As shown in the table above, the highest dispersion is TOPIX with a percentage of
6.5422. Meanwhile, 3.2149% of US$ exchange rate has the lowest level of
dispersion among all the other dispersion level in all share prices.
Skewness:It describes the asymmetry from the normal distribution in a set of
statistical data that comes in two forms; negative skewness or positive
skewness. However, it depends on whether the data points are mostly skewed to
the left or to the right of the data average. SP500 has shown the highest
negative skewness with the rate of (-0.06122) in compared to the lowest
negative skewness for FTSE which is (-0.0274).
Kurtosis: It is the measure of the peak of a distribution, and indicating the level
(high or low) of the distribution surrounding the mean. The few type of Kurtosis
areMesokurtic, Leptokurtic and also Platykurtic. ST has shown to have the highest
kurtosis of 3.417 ST in compared to ASX which has the lowest kurtosis of 0.345.
Coefficient of Variation (CV): CV is used to measure the variability of
dispersion within two or more set of series. The series that has a greater CV
tends to have greater variable in compared to the series that has a lesser CV

tends to have lesser variables or to say it is more stable. TOPIX has a relative
high CV that shows it is relatively unstable. In contrast, SP500 has the least
variable and said to be the most stable share prices of 5.4931 among all other
share prices.
The probability of obtaining negative return: Probability of negative return
is the probability that the risk or negative outcome tends to occur. As projected
by the table above, TOPIX obtaining the highest probability of gaining a negative
outcome with 50% in compared to SP500 that obtained the least likelihood of
negative return with 43%.

(c) Risk and Return from investment


(US$)
SP500
ASX
TOPIX
FTSE
ST

RISK
3.21%
4.19%
3.85%
5.64%
4.20%
6.54%

RETURN
0.140%
0.760%
0.510%
0.040%
0.540%
0.650%

Risk and Return


0.80%

0.76%
0.54%

0.60%
Mean Return

0.40%
0.20%

0.65%

0.51%

0.14%

0.04%
0.00%
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
Risk

(d)Histogram graph of the returns


USD$
Frequenc
Bin
y
-0.18
0
-0.16
1
-0.14
0
-0.12
0
-0.1
1
-0.08
3
-0.06
7
-0.04
13
-0.02
44
0
80
0.02
87
0.04
47
0.06
27
0.08
7
0.1
2
Total
319

Histogram - USD$

Frequency

100
80
60
40
20
0

Frequency

Return

Explanation
The histogram distribution of US$ is negatively skewed. The distribution has a
longer tail to the left. This shows that the mean return < median return < mode.

SP500
Frequenc
Bin
y
-0.18
0
-0.16
1
-0.14
1
-0.12
0
-0.1
2
-0.08
8
-0.06
11
-0.04
13
-0.02
35
0
45
0.02
80
0.04
62
0.06
35
0.08
15
0.1
9
0.12
2
Total
319

Histogram - SP500

Frequency

100
80
60
40
20
0

Frequency

Return

Explanation

The histogram distribution of SP500 is negatively skewed. The distribution has a


longer tail to the left. This indicates that mean return < median return < mode.

ASX
Frequenc
Bin
y
-0.18
0
-0.16
0
-0.14
0
-0.12
1
-0.1
3
-0.08
1
-0.06
13
-0.04
27
-0.02
30
0
56
0.02
73
0.04
54
0.06
40
0.08
19
0.1
1
0.12
0
0.14
1
Total
319

Histogram - ASX

Frequency

80
60
40
20
0

Frequency

Return

Explanation
The histogram distribution of ASX is negatively skewed. The distribution has a
longer tail to the left. This indicated that mean return < median return < mode.

TOPIX
Frequenc
Bin
y
-0.24
0
-0.2
2
-0.16
0
-0.12
5
-0.08
13
-0.04
53
0
86
0.04
87
0.08
50
0.12
15
0.16
7
0.2
1
Total
319

Histogram - TOPIX

Frequency

100
80
60
40
20
0

Frequency

Return

Explanation
The histogram distribution of TOPIX is negatively skewed. The distribution has a
longer tail to the left. This means that mean return < median return < mode.

FTSE
Frequenc
Bin
y
-0.14
0
-0.12
1
-0.1
3
-0.08
7
-0.06
14
-0.04
18
-0.02
31
0
60
0.02
62
0.04
63
0.06
31
0.08
17
0.1
9
0.12
2
0.14
0
0.16
1
Total
319

Histogram - FTSE

Frequency

80
60
40
20
0

Frequency

Return

Explanation
The histogram distribution of FTSE is negatively skewed. The distribution has a
longer tail to the left. With this, it indicated that mean return < median return <
mode.

Bin
-0.24
-0.20
-0.16
-0.12
-0.08
-0.04
0.00
0.04
0.08
0.12
0.16
0.20
0.24
0.28
0.32
Total

ST
Frequenc
y
0
1
6
6
10
31
84
104
49
17
6
1
1
1
2
319

Histogram - ST

Frequency

150
100
50
0

Frequency

Return

Explanation
The histogram distribution is negatively skewed. The distribution has a longer tail
to the left. This has indicated that mean return < median return < mode.

(e)Normality test on the returns

(i) Null Hypothesis: Normal Distribution


Alternative Hypothesis: Non-normal Distribution
Chi-square Distribution
Significant Critical Value at 5% level -> 5.99
We reject null hypothesis at the 95% significance level if JarqueBera value > 5.99
Jargue- Bera (JB) = ((n/6)*((Skewness2)+((Kurtosis2)/4)))
i.

SP500

= ((319/6)*(((-0.61222) + ((1.22782)/4)))
=39.9627

Since 39.9627 > 5.99, thus, we reject the null hypothesis.


It is a non-normal distribution.
The distribution is non-normal because the returns follow a random walk
hypothesis.
ii.

ASX

= ((319/6)*(((-0.3680)2)+((0.34452)/4)))
=8.7775

Since 8.7775 > 5.99, thus, we reject the null hypothesis.


It is a non-normal distribution.
The distribution is non-normal because the returns follow a random walk
hypothesis.

iii.

TOPIX

= ((319/6)*(((-0.10232)+((0.87442)/4)))
=10.7200
Since 10.7200 > 5.99, thus, we reject the null hypothesis.
It is a non-normal distribution.
The distribution is non-normal because the returns follow a random walk
hypothesis.

iv.

FTSE

= ((319/6)*(((-0.27422)+((0.51362)/4)))
=7.5034

Since 7.5034 > 5.99, thus, we reject the null hypothesis.


It is a non-normal distribution.
The distribution is non-normal because the returns follow a random walk
hypothesis.
v.

ST

= ((319/6)*(((-0.0606)2) + ((3.41702)/4)))
=155.3855

Since 155.3885 > 5.99, thus, we reject the null hypothesis.


It is a non-normal distribution.
The distribution is non-normal because the returns follow a random walk hypothesis.

Section II. Variance, Covariance Matrix and EMH Testing


B. Share Price Returns & Exchange Rate Return

(a)
US$

SP500

ASX

TOPIX

FTSE

ST

US$
SP500
ASX
TOPIX
FTSE

1
0.3770
0.3864
0.2886
0.3265

1
0.6295
0.4453
0.7886

1
0.4646
0.6476

1
0.4301

ST

0.1339

0.1027

0.0473

0.0975

0.0585

Based on the table above, the weakest correlation coefficient lies between ST and ASX which
is a correlation of 0.0473. This indicates that TOPIX and SP500 will not get the benefit of
risk minimization as 0.0473 is further from 1. On the other hand, FTSE and SP500 have the
strongest correlation coefficient of 0.7886. This also indicates that FTSE and SP500 will get
the benefit of risk minimization as 0.7886 is the closest to 1.

(b)

US$
SP500
ASX
TOPIX
FTSE

US$
0.00103
0.00051
0.00048
0.00052
0.00044

SP500
0.00051
0.00175
0.00102
0.00105
0.00139

ASX
0.00048
0.00102
0.00149
0.00101
0.00105

TOPIX
0.00052
0.00105
0.00101
0.00318
0.00102

FTSE
0.00044
0.00139
0.00105
0.00102
0.00176

ST
0.00028
0.00028
0.00012
0.00036
0.00016

ST

0.00028

0.00028

0.00012

0.00036

0.00016

0.00428

The table above shows the covariance between the market share indices and the returns.
Negative covariance implies a move in different direction while positive covariance implies a
move in the same direction. The table shows the covariance between all data is positive
which means that the returns on asset for all share prices and exchange rates move in the
same direction. Furthermore, the higher the covariance of the particular share index, the more
variable the share index is. It has shown in the table that ST has the highest covariance of
0.00428, therefore ST is the most variable share index in comparison to other shares.

(c)
US$
Autocorrelatio
n

SP500

0.0498

0.0646

ASX
0.1198

TOPIX
0.0859

FTSE
-0.0182

ST
0.0601

The correlation of US$, SP500, ASX, TOPIX, FTSE and ST are all close to zero, therefore
they all satisfy the weak-form efficiency. FTSE has the correlation of -0.0182 which is the
closest to zero compare to the others.

Section III: Portfolio Construction


1. Portfolio 1

Shares

Weight

ASX200

0.5

FTSE100

0.5

Return
0.00514
7
0.5446

Expected Returns:

E(RP1)

W ASX R ASX +W FTSE R FTSE

(0.50.5147)+( 0.50.5446)

0.005297 0.0053%
Standard Deviation:

P 1= W 2A SX 2A SX +W 2FTSE 2FTSE +2 W ASX Cov ASXFTE


0.03854
2
0.5 ( 2)+0.5 (0.04200 )+ 2(0.5)(0.5)(0.00105)

0.00134
= 0.0366

Risk
0.03854
0.04200

Cov (ASX, FTSE)


0.00105

2. Portfolio 2

Shares

Weight

ST

0.45

ASX

0.25

SP500

0.30

Return
0.6474
%
0.5147
%
0.7626
%

Risk
0.06542
%
0.03854
%
0.04189
%

Cov (ST,ASX)

Cov
(ASX,SP500)

Cov (ST,SP500)

0.00102

0.00028

0.00012

Expected Returns:
E(RP2) =

W ST R ST +W ASX R ASX + W SP 500 R SP500

( 0.450.6474 ) + ( 0.250.5147 ) + ( 0.300.7626 )

= 0.009624 0.9624%

Standard Deviation:
2

SP500+ 2 W ST W ASX ST , ASX ST ASX


2
2
2
2
2
W ST ST +W ASX ASX +W SP 500 + 2W ASX W SP 500 ASX ,SP 500 ASX SP 500+2 W
P 2=

ST

W SP500 ST ,SP500 ST SP500

0.452 ( 0.065422) + 0.252 ( 0.038542 ) +0.32 ( 0.041892 ) +2 ( 0.45 ) ( 0.25 ) ( 0.00012 )


+2 ( 0.25 ) ( 0.3 ) ( 0.00102 )+ 2(0.45)(0.3)(0.00028)

0.00137
= 0.0371
3. Portfolio 3

Share

Weig

Return

Risk

Cov

Cov

Cov

Cov

Cov

ht

ASX

0.2

SP

0.2

ST

0.2

FTSE

0.2

TOPIX

0.2

0.5147
%
0.7626
%
0.6474
%
0.5446
%
0.0412
%

0.03854
%
0.04189
%
0.06542
%
0.04200
%
0.05638
%

Cov
(SP,FTSE)

0.00139

(ASX,SP5
00)

(ASX,S
T)

(ASX,FTS
E)

(ASX,TOPI
X)

(SP,ST
)

0.00102

0.00012

0.00105

0.00101

0.0002
8

Cov
(SP,TOPIX)

0.00105

Cov
(ST,FTSE)

Cov
(ST,TOPIX)

Cov
(FTSE,TOP
IX)

0.00016

0.00036

0.00102

Expected Return:
E(Rp3)

W ASX R ASX +W SP 500 RSP 500 +W ST R ST +W FTSE R FTSE +W TOPIX RTOPIX

( 0.20.5147 )+ ( 0.20.7626 )+ ( 0.20.6474 ) + ( 0.20.5446 )+(0.20.0412)


0.005021 0.50
Standard Deviation:

W ASX ASX +W SP 500 SP500 +W ST ST +W FTSE FTSE +W TOPIX TOPIX


+2 W ASX W SP 500 ST , ASX ST SP 500
+2 W ASX W ST ASX , ST ST ST
+2 W ASX W FTSE ST , ASX ST FTSE
P 3= + 2W ASX W TOPIX ASX , ST ASX TOPIX + 2W SP 500 W ST ST . SP 500 ST ST
+2W SP 500 W FTSE ST . SP 500 ST FTSE
+ 2W SP 500 W TOPIX ST . SP 500 ST TOPIX
+2W ST W FTSE ST . ST ST FTSE
+2W ST W TOPIX ST . ST ST TOPIX
+ 2W FTSE W TOPIX ST . FTSE ST TOPIX

0.202 ( 0.038542 ) +0.20 2 ( 0.041892 ) +0.20 2 ( 0.065422 ) +0.20 2 ( 0.04200 2) + 0.202 ( 0.056382 )
+2 ( 0.2 ) ( 0.2 ) ( 0.00102 )
+2 ( 0.2 ) ( 0.2 ) ( 0.00012 )
+ 2 ( 0.2 ) ( 0.2 ) ( 0.00105 )
+2 ( 0.2 ) ( 0.2 ) ( 0.00101 )
+ 2 ( 0.2 ) ( 0.2 ) ( 0.00028 )
+ 2 ( 0.2 ) ( 0.2 ) ( 0.00139 )
+ 2 ( 0.2 ) ( 0.2 ) ( 0.00105 )
+ 2 ( 0.2 ) ( 0.2 ) ( 0.00016 )
+ 2 ( 0.2 ) ( 0.2 ) ( 0.00036 )
+2(0.2)(0.2)(0.00102)