Term Paper

On
Calculation of Total Risk, Relative Risk & Market Risk

LafargeHolcim Bangladesh Limited (LHBL)

Submitted to

Prof. Dr. Mahmuda Akter

Department of Accounting and Information System
Faculty of Business Studies
University of Dhaka.

Submitted by

Md. Nazmul Hasan

MPA 20011035
10th Batch
Master of Professional Accounting Program
Department of Accounting & Information System
Faculty of Business Studies
University of Dhaka.

Date of Submission: 25th of September 2020

25th of September 2020

Prof. Dr. Mahmuda Akter

Department of Accounting and Information System
Faculty of Business Studies
University of Dhaka.

Subject: Submission of Term Paper on Calculation of Total Risk, Relative

Risk & Market Risk

Dear Madam,

I submitting herewith Term Paper on Calculation of Total Risk, Relative Risk &
Market Risk of LafargeHolcim Bangladesh Limited (LHBL). as per your instruction
to fulfill the Financial Management course requirement.

The main purpose of this report is to study and create Portfolio of stock and
Calculation of Total Risk, Relative Risk & Market Risk of the companies.

I can assure you the authenticity of this report. I sincerely hope that this report
will merit your approval. I am grateful to you for giving me the opportunity to
study and analysis of the company’s Total Risk, Relative Risk & Market Risk.

Sincerely yours,

Md. Nazmul Hasan

MPA 20011035
Master of Professional Accounting Program
Department of Accounting & Information System
University of Dhaka
 Here we used 6 months (July 2019 to December 2019) closing price of
LafargeHolcim Bangladesh Limited for each day to calculate the beta coefficient.

Closing Percentage
Percentage DSEX
Sl. Price (r_i-r Change of (m_i-m (r_i-r ̅ ) * (r_i-r ̅ )^2 *
Date Change of (r_i-r ̅ )^2 Index (m_i-m ̅ )^2
No. (LHBL ̅) DSEX ̅) (m_i-m ̅ ) (m_i-m ̅ )^2
LHBL Closing
) Index
5384.9256
1 02-Jul-19 39.3
3
5372.2110
2 03-Jul-19 39.1 -0.51% -0.40% 0.00161% -0.24% -0.08% 0.00006% 0.00032% 0.00000%
8
5380.7935
3 04-Jul-19 38.7 -1.02% -0.91% 0.00837% 0.16% 0.32% 0.00100% -0.00290% 0.00000%
1
5333.0874
4 07-Jul-19 38 -1.81% -1.70% 0.02892% -0.89% -0.73% 0.00532% 0.01241% 0.00000%
6
5318.6154
5 08-Jul-19 37.7 -0.79% -0.68% 0.00464% -0.27% -0.11% 0.00013% 0.00078% 0.00000%
6
5280.0452
6 09-Jul-19 36.9 -2.12% -2.01% 0.04056% -0.73% -0.57% 0.00323% 0.01144% 0.00000%
4
5230.6307
7 10-Jul-19 36.4 -1.36% -1.25% 0.01555% -0.94% -0.78% 0.00607% 0.00971% 0.00000%
6
8 11-Jul-19 36.4 0.00% 0.11% 0.00012% 5222.303 -0.16% 0.00% 0.00000% 0.00000% 0.00000%
5179.4986
9 14-Jul-19 36.7 0.82% 0.93% 0.00869% -0.82% -0.66% 0.00439% -0.00618% 0.00000%
7
10 15-Jul-19 36.1 -1.63% -1.53% 0.02331% 5091.4849 -1.70% -1.54% 0.02379% 0.02355% 0.00001%
5124.4496
11 16-Jul-19 36.6 1.39% 1.49% 0.02230% 0.65% 0.80% 0.00647% 0.01201% 0.00000%
4
5133.1357
12 17-Jul-19 37.3 1.91% 2.02% 0.04083% 0.17% 0.33% 0.00107% 0.00660% 0.00000%
8
5130.6983
13 18-Jul-19 37.6 0.80% 0.91% 0.00833% -0.05% 0.11% 0.00012% 0.00100% 0.00000%
7
5033.7465
14 21-Jul-19 36.6 -2.66% -2.55% 0.06510% -1.89% -1.73% 0.03002% 0.04421% 0.00002%
6
4966.4406
15 22-Jul-19 36.1 -1.37% -1.26% 0.01583% -1.34% -1.18% 0.01393% 0.01485% 0.00000%
3
5077.7515
16 23-Jul-19 37.2 3.05% 3.16% 0.09956% 2.24% 2.40% 0.05751% 0.07567% 0.00006%
6
5077.2895
17 24-Jul-19 37.8 1.61% 1.72% 0.02962% -0.01% 0.15% 0.00022% 0.00254% 0.00000%
6
5133.2552
18 25-Jul-19 38.4 1.59% 1.70% 0.02875% 1.10% 1.26% 0.01586% 0.02135% 0.00000%
6
19 28-Jul-19 39 1.56% 1.67% 0.02791% 5133.9332 0.01% 0.17% 0.00029% 0.00284% 0.00000%
5160.7492
20 29-Jul-19 40.6 4.10% 4.21% 0.17730% 0.52% 0.68% 0.00461% 0.02860% 0.00001%
7
5125.0222
21 30-Jul-19 39.9 -1.72% -1.62% 0.02611% -0.69% -0.54% 0.00287% 0.00865% 0.00000%
3
5138.7902
22 31-Jul-19 39.9 0.00% 0.11% 0.00012% 0.27% 0.43% 0.00181% 0.00046% 0.00000%
5
5169.7389
23 01-Aug-19 39.7 -0.50% -0.39% 0.00155% 0.60% 0.76% 0.00576% -0.00298% 0.00000%
4
5172.8641
24 04-Aug-19 39.6 -0.25% -0.14% 0.00021% 0.06% 0.22% 0.00047% -0.00031% 0.00000%
8
5160.3708
25 05-Aug-19 39.6 0.00% 0.11% 0.00012% -0.24% -0.08% 0.00007% -0.00009% 0.00000%
6
26 06-Aug-19 39.7 0.25% 0.36% 0.00130% 5187.2926 0.52% 0.68% 0.00461% 0.00245% 0.00000%
27 07-Aug-19 39.8 0.25% 0.36% 0.00130% 5187.2002 0.00% 0.16% 0.00024% 0.00056% 0.00000%
5201.4205
28 08-Aug-19 40.2 1.01% 1.11% 0.01239% 0.27% 0.43% 0.00186% 0.00480% 0.00000%
5
5216.5361
29 18-Aug-19 40.1 -0.25% -0.14% 0.00020% 0.29% 0.45% 0.00200% -0.00063% 0.00000%
5
5227.2659
30 19-Aug-19 40.4 0.75% 0.86% 0.00733% 0.21% 0.36% 0.00131% 0.00311% 0.00000%
3
5227.4984
31 20-Aug-19 40.1 -0.74% -0.63% 0.00403% 0.00% 0.16% 0.00026% -0.00102% 0.00000%
6
5223.4143
32 21-Aug-19 40 -0.25% -0.14% 0.00020% -0.08% 0.08% 0.00006% -0.00011% 0.00000%
4
5236.8512
33 22-Aug-19 39.9 -0.25% -0.14% 0.00020% 0.26% 0.41% 0.00172% -0.00059% 0.00000%
7
5223.7271
34 25-Aug-19 39.2 -1.75% -1.65% 0.02710% -0.25% -0.09% 0.00009% 0.00154% 0.00000%
9
 5165.7651
35 26-Aug-19 39.1 -0.26% -0.15% 0.00022% -1.11% -0.95% 0.00908% 0.00140% 0.00000%
2
5178.7042
36 27-Aug-19 39 -0.26% -0.15% 0.00022% 0.25% 0.41% 0.00166% -0.00060% 0.00000%
1
5139.9987
37 28-Aug-19 38.9 -0.26% -0.15% 0.00022% -0.75% -0.59% 0.00349% 0.00088% 0.00000%
9
5095.7766
38 29-Aug-19 38.6 -0.77% -0.66% 0.00440% -0.86% -0.70% 0.00495% 0.00466% 0.00000%
6
5070.6854
39 01-Sep-19 38.2 -1.04% -0.93% 0.00861% -0.49% -0.34% 0.00113% 0.00311% 0.00000%
7
5033.5373
40 02-Sep-19 38 -0.52% -0.42% 0.00173% -0.73% -0.58% 0.00331% 0.00239% 0.00000%
3
5007.0564
41 03-Sep-19 37.7 -0.79% -0.68% 0.00464% -0.53% -0.37% 0.00136% 0.00252% 0.00000%
6
42 04-Sep-19 37.2 -1.33% -1.22% 0.01484% 4986.3703 -0.41% -0.26% 0.00066% 0.00312% 0.00000%
5013.0153
43 05-Sep-19 37.5 0.81% 0.91% 0.00836% 0.53% 0.69% 0.00478% 0.00632% 0.00000%
6
Closing Percentage
Percentage DSEX
Sl. Price (r_i-r Change of (m_i-m (r_i-r ̅ ) * (r_i-r ̅ )^2 *
Date Change of (r_i-r ̅ )^2 Index (m_i-m ̅ )^2
No. (LHBL ̅) DSEX ̅) (m_i-m ̅ ) (m_i-m ̅ )^2
LHBL Closing
) Index
5033.7980
44 08-Sep-19 37.4 -0.27% -0.16% 0.00025% 0.41% 0.57% 0.00327% -0.00091% 0.00000%
6
5008.9669
45 09-Sep-19 37.4 0.00% 0.11% 0.00012% -0.49% -0.34% 0.00113% -0.00036% 0.00000%
9
4933.1771
46 11-Sep-19 36.8 -1.60% -1.50% 0.02238% -1.51% -1.36% 0.01839% 0.02029% 0.00000%
9
4933.8943
47 12-Sep-19 37.1 0.82% 0.92% 0.00853% 0.01% 0.17% 0.00029% 0.00158% 0.00000%
8
4942.2323
48 15-Sep-19 37.5 1.08% 1.19% 0.01407% 0.17% 0.33% 0.00106% 0.00387% 0.00000%
5
49 16-Sep-19 37.4 -0.27% -0.16% 0.00025% 4959.7308 0.35% 0.51% 0.00261% -0.00081% 0.00000%
4928.9833
50 17-Sep-19 37.3 -0.27% -0.16% 0.00025% -0.62% -0.46% 0.00214% 0.00074% 0.00000%
5
4888.0158
51 18-Sep-19 36.6 -1.88% -1.77% 0.03128% -0.83% -0.67% 0.00455% 0.01192% 0.00000%
7
4855.9858
52 19-Sep-19 36.7 0.27% 0.38% 0.00145% -0.66% -0.50% 0.00248% -0.00190% 0.00000%
3
4920.9672
53 22-Sep-19 36.9 0.54% 0.65% 0.00427% 1.34% 1.50% 0.02235% 0.00976% 0.00000%
3
5000.2355
54 23-Sep-19 37.3 1.08% 1.19% 0.01421% 1.61% 1.77% 0.03125% 0.02107% 0.00000%
1
55 24-Sep-19 36.9 -1.07% -0.96% 0.00930% 4958.7206 -0.83% -0.67% 0.00453% 0.00649% 0.00000%
4951.7367
56 25-Sep-19 37 0.27% 0.38% 0.00144% -0.14% 0.02% 0.00000% 0.00006% 0.00000%
3
4968.4690
57 26-Sep-19 36.7 -0.81% -0.70% 0.00494% 0.34% 0.49% 0.00245% -0.00348% 0.00000%
5
4975.7384
58 29-Sep-19 36.7 0.00% 0.11% 0.00012% 0.15% 0.30% 0.00092% 0.00033% 0.00000%
6
4947.6394
59 30-Sep-19 35.8 -2.45% -2.34% 0.05495% -0.56% -0.41% 0.00166% 0.00956% 0.00000%
9
4949.3992
60 01-Oct-19 36.3 1.40% 1.50% 0.02264% 0.04% 0.19% 0.00037% 0.00290% 0.00000%
3
4936.3718
61 02-Oct-19 36.1 -0.55% -0.44% 0.00196% -0.26% -0.11% 0.00011% 0.00047% 0.00000%
5
62 03-Oct-19 36 -0.28% -0.17% 0.00029% 4937.8202 0.03% 0.19% 0.00035% -0.00031% 0.00000%
4916.6855
63 06-Oct-19 35.9 -0.28% -0.17% 0.00029% -0.43% -0.27% 0.00073% 0.00046% 0.00000%
7
4894.3130
64 07-Oct-19 35.8 -0.28% -0.17% 0.00029% -0.46% -0.30% 0.00089% 0.00051% 0.00000%
1
4862.2590
65 09-Oct-19 35.3 -1.40% -1.29% 0.01660% -0.65% -0.50% 0.00248% 0.00642% 0.00000%
7
4810.2194
66 10-Oct-19 34.7 -1.70% -1.59% 0.02533% -1.07% -0.91% 0.00834% 0.01454% 0.00000%
1
4761.8790
67 13-Oct-19 32.8 -5.48% -5.37% 0.28809% -1.00% -0.85% 0.00719% 0.04552% 0.00002%
8
4711.3078
68 14-Oct-19 31 -5.49% -5.38% 0.28941% -1.06% -0.91% 0.00819% 0.04869% 0.00002%
6
4821.6451
69 15-Oct-19 32 3.23% 3.33% 0.11115% 2.34% 2.50% 0.06245% 0.08331% 0.00007%
4
70 16-Oct-19 31.9 -0.31% -0.20% 0.00042% 4781.6292 -0.83% -0.67% 0.00453% 0.00138% 0.00000%
 4770.9967
71 17-Oct-19 32 0.31% 0.42% 0.00178% -0.22% -0.07% 0.00004% -0.00028% 0.00000%
1
4782.0933
72 20-Oct-19 32.6 1.88% 1.98% 0.03933% 0.23% 0.39% 0.00152% 0.00772% 0.00000%
1
73 21-Oct-19 32.9 0.92% 1.03% 0.01058% 4761.4218 -0.43% -0.28% 0.00076% -0.00283% 0.00000%
4708.6800
74 22-Oct-19 32.7 -0.61% -0.50% 0.00250% -1.11% -0.95% 0.00904% 0.00475% 0.00000%
2
4726.6204
75 23-Oct-19 33 0.92% 1.03% 0.01052% 0.38% 0.54% 0.00289% 0.00552% 0.00000%
3
4772.0018
76 24-Oct-19 33.6 1.82% 1.93% 0.03711% 0.96% 1.12% 0.01248% 0.02152% 0.00000%
6
4752.6483
77 27-Oct-19 33.9 0.89% 1.00% 0.01002% -0.41% -0.25% 0.00062% -0.00249% 0.00000%
7
4699.2262
78 28-Oct-19 33.5 -1.18% -1.07% 0.01149% -1.12% -0.97% 0.00935% 0.01037% 0.00000%
9
4670.7452
79 29-Oct-19 33.3 -0.60% -0.49% 0.00239% -0.61% -0.45% 0.00202% 0.00220% 0.00000%
1
4683.2050
80 30-Oct-19 32.9 -1.20% -1.09% 0.01195% 0.27% 0.42% 0.00180% -0.00463% 0.00000%
5
4682.9023
81 31-Oct-19 32.5 -1.22% -1.11% 0.01227% -0.01% 0.15% 0.00023% -0.00167% 0.00000%
8
4712.0898
82 03-Nov-19 32.7 0.62% 0.72% 0.00523% 0.62% 0.78% 0.00609% 0.00565% 0.00000%
3
83 04-Nov-19 32 -2.14% -2.03% 0.04131% 4678.3624 -0.72% -0.56% 0.00312% 0.01136% 0.00000%
4703.7026
84 05-Nov-19 32.1 0.31% 0.42% 0.00177% 0.54% 0.70% 0.00488% 0.00294% 0.00000%
2
85 06-Nov-19 32.2 0.31% 0.42% 0.00176% 4754.6985 1.08% 1.24% 0.01540% 0.00521% 0.00000%
4771.9166
86 07-Nov-19 32.4 0.62% 0.73% 0.00532% 0.36% 0.52% 0.00269% 0.00379% 0.00000%
2
4781.4758
87 11-Nov-19 32.1 -0.93% -0.82% 0.00669% 0.20% 0.36% 0.00128% -0.00292% 0.00000%
1
4779.1897
88 12-Nov-19 32.4 0.93% 1.04% 0.01087% -0.05% 0.11% 0.00012% 0.00114% 0.00000%
8
4737.1700
89 13-Nov-19 31.8 -1.85% -1.74% 0.03041% -0.88% -0.72% 0.00522% 0.01259% 0.00000%
8
4710.3661
90 14-Nov-19 32.1 0.94% 1.05% 0.01106% -0.57% -0.41% 0.00167% -0.00430% 0.00000%
8
4717.3925
91 17-Nov-19 31.8 -0.93% -0.83% 0.00683% 0.15% 0.31% 0.00094% -0.00253% 0.00000%
2
4722.0197
92 18-Nov-19 31.8 0.00% 0.11% 0.00012% 0.10% 0.26% 0.00065% 0.00028% 0.00000%
7
Closing Percentage
Percentage DSEX
Sl. Price (r_i-r Change of (m_i-m (r_i-r ̅ ) * (r_i-r ̅ )^2 *
Date Change of (r_i-r ̅ )^2 Index (m_i-m ̅ )^2
No. (LHBL ̅) DSEX ̅) (m_i-m ̅ ) (m_i-m ̅ )^2
LHBL Closing
) Index
4722.3745
93 19-Nov-19 31.9 0.31% 0.42% 0.00179% 0.01% 0.16% 0.00027% 0.00069% 0.00000%
6
4691.9354
94 20-Nov-19 31.9 0.00% 0.11% 0.00012% -0.64% -0.49% 0.00238% -0.00053% 0.00000%
2
4706.6674
95 21-Nov-19 31.6 -0.94% -0.83% 0.00693% 0.31% 0.47% 0.00222% -0.00392% 0.00000%
8
96 24-Nov-19 31.8 0.63% 0.74% 0.00549% 4688.4288 -0.39% -0.23% 0.00053% -0.00171% 0.00000%
4693.6258
97 25-Nov-19 31.9 0.31% 0.42% 0.00179% 0.11% 0.27% 0.00072% 0.00113% 0.00000%
3
4722.3081
98 26-Nov-19 31.9 0.00% 0.11% 0.00012% 0.61% 0.77% 0.00590% 0.00083% 0.00000%
7
4730.3492
99 27-Nov-19 35 9.72% 9.83% 0.96550% 0.17% 0.33% 0.00107% 0.03215% 0.00001%
2
10 4731.4371
28-Nov-19 38.5 10.00% 10.11% 1.02175% 0.02% 0.18% 0.00032% 0.01819% 0.00000%
0 6
10 4758.8111
01-Dec-19 39.4 2.34% 2.45% 0.05982% 0.58% 0.74% 0.00541% 0.01799% 0.00000%
1 4
10 4734.5940
02-Dec-19 36.5 -7.36% -7.25% 0.52595% -0.51% -0.35% 0.00124% 0.02552% 0.00001%
2 4
10 4697.3509
03-Dec-19 38.7 6.03% 6.14% 0.37645% -0.79% -0.63% 0.00396% -0.03863% 0.00001%
3 5
10 4702.9836
04-Dec-19 37.6 -2.84% -2.73% 0.07476% 0.12% 0.28% 0.00077% -0.00757% 0.00000%
4 1
10 4671.3361
05-Dec-19 36.2 -3.72% -3.62% 0.13070% -0.67% -0.52% 0.00266% 0.01865% 0.00000%
5 1
10 4596.0040
08-Dec-19 35.2 -2.76% -2.65% 0.07045% -1.61% -1.46% 0.02119% 0.03864% 0.00001%
6 1
10 4533.7531
09-Dec-19 34.7 -1.42% -1.31% 0.01722% -1.35% -1.20% 0.01434% 0.01572% 0.00000%
7 3
10 4506.9380
10-Dec-19 34.5 -0.58% -0.47% 0.00219% -0.59% -0.43% 0.00189% 0.00203% 0.00000%
8 2
10 4512.3900
11-Dec-19 35.3 2.32% 2.43% 0.05890% 0.12% 0.28% 0.00077% 0.00674% 0.00000%
9 7
11 4514.4492
12-Dec-19 36.7 3.97% 4.07% 0.16599% 0.05% 0.20% 0.00041% 0.00825% 0.00000%
0 3
11 4498.4906
15-Dec-19 35.4 -3.54% -3.43% 0.11793% -0.35% -0.20% 0.00039% 0.00675% 0.00000%
1 9
11 4419.8283
17-Dec-19 34.5 -2.54% -2.43% 0.05925% -1.75% -1.59% 0.02534% 0.03875% 0.00002%
2 2
11 4417.9521
18-Dec-19 34.7 0.58% 0.69% 0.00473% -0.04% 0.11% 0.00013% 0.00079% 0.00000%
3 9
11 4456.8368
19-Dec-19 34.8 0.29% 0.40% 0.00157% 0.88% 1.04% 0.01076% 0.00411% 0.00000%
4 1
11 4430.9589
22-Dec-19 34.6 -0.57% -0.47% 0.00218% -0.58% -0.42% 0.00180% 0.00198% 0.00000%
5 7
11 4394.4414
23-Dec-19 34.1 -1.45% -1.34% 0.01787% -0.82% -0.67% 0.00445% 0.00892% 0.00000%
6 2
11 4390.6736
24-Dec-19 33.8 -0.88% -0.77% 0.00595% -0.09% 0.07% 0.00005% -0.00055% 0.00000%
7 1
11 4418.8387
26-Dec-19 33.9 0.30% 0.40% 0.00163% 0.64% 0.80% 0.00637% 0.00323% 0.00000%
8 1
11 4433.9471
29-Dec-19 33.8 -0.29% -0.19% 0.00035% 0.34% 0.50% 0.00249% -0.00093% 0.00000%
9 5
12 4452.9347
30-Dec-19 33.6 -0.59% -0.48% 0.00234% 0.43% 0.59% 0.00342% -0.00283% 0.00000%
0 1
Total 4312.9 -12.87% 5.67% 587055.33 -18.68% 0.63% 0.84828% 0.00032%
Mean Return -0.108% -0.157%
Variance 0.0476% 0.00526% 0.0053%
From the above table we can extract the following information,

The equation for calculating the return is as

Pt −Pt−1
r i=
Pt −1
Where,

r i=return during period

Pt =Closing price ( value ) of stock at time t
Pt −1 =Closing price ( value ) of stock at time t−1

The formula for finding the expected value of return, ŕ, also known as average return,
when all of the outcomes, r t , is
n

∑ rt
ŕ = t =1
n
Where,
ŕ= expected rate of return
r t = return for the outcome
n=is the number of observations.

Mean return of LHBL for last 6 months (n =120 transaction or market operation days
in last six months from July to December 2019),
n

∑ ri −1 2.87 %
i=1
ŕ = = =−0.107 %
n 120
Standard deviation of the return based on historical data of LHBL is,
n 2

σ r=
√∑ n−1
i=1
( r i−ŕ )
=0.218 %
The coefficient of variation, CV, is a measure of relative dispersion that is useful in
comparing the risks of assets with differing expected returns, the expression for the
coefficient of variation CV, is

σr 0. 218 %
CV = =¿ =−2.04
ŕ −0 .107 %

The LHBL stock would not be an acceptable investment.

Again Mean return of the market (Dhaka Stock Exchange) is
n

∑ mi −18.68 %
ḿ= i=1 = =−0.157 %
n 120−1
and the Standard deviation of the market return based on historical data of DSE is,

n 2

σ m=
√∑ i=1
( mi−ḿ )
n−1
=0.07 28 %

Finally Correlation Coefficient ρ between the desired stock LHBL and DSE is
n

∑ (r i− ŕ)(mi− ḿ)
i=1
ρrm= =0. 4504
n n

√∑ i=1
(r i−ŕ )2 ∑ (m i−ḿ)2
i=1

Non-diversifiable risk coefficient of LHBL, b, will be,

σ r σ m ρrm 0.218 % × 0.07 28 % × 0. 4504

β= 2
= =1. 35
σ m
0.005 3

Comment: Since, the Non-diversifiable risk i.e. beta coefficient, for LHBL 1.35 the
stock of the company moves in same direction as market.