Australian Equities Market.

Project You have been approached by Mr Warren Buffet Junior who wishes to invest in the Australian equities market. Since Mr Buffet is not very familiar with the Australian market, he is thinking of investing either in blue-chip equity stocks with good dividend yields with some limited scope for speculative stocks, or high growth small stocks. Anyway, he named some ASX listed companies for the potential portfolio candidates yet he needs a portfolio which combines only 5 stocks, and he doesn’t mind having some companies which are not in the list below: – BHP Billiton – National Australia Bank – Telstra – Westpac – Woolworths . To this end, you are asked to prepare a report to Mr Warren Buffet Junior along the following lines. Required Part 1:
1. Obtain monthly share price data for each of your group’s 5 chosen companies from 1st August 2007 to 1st August 2013. (Hint: you need to think about the criteria or theory of choosing 5 companies among a large group of candidates)
2. Convert the raw price data into a continuously compounded monthly return series being careful to adjust for dividends and any capital changes. (Hint: adjustments have been made within Datastream already, which require your explanation)
3. Plot the month return series. Provide a brief comment on the distribution of each company’s returns and make reference to prior empirical work of the return distribution of the equities.
4. Estimate the monthly expected returns and variances for each of your selected companies and the monthly expected correlation coefficient for each of the 10 pairs of these companies.
all the data using fro Datastream.
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