Section A: Background & review of literature

Review a minimum of 10 peer-reviewed journals on the topic risk and return for this assessment.

Select a financial company or bank. Provide the background of the organisation including, but not limited, to the following

1. History

2. Products/Services

3. Location(s) of business activities

4. Market Share

5. Directors

6. Latest P/E Ratio

7. Dividend Policy

8. Environmental Impact and Policy

9. Beta as given in literature

QBE insurance group LTD should be the company

Section B: Share price statistics and basic estimation of average return

Record on the excel spreadsheet:

The monthly closing price history of the chosen BANK or financial company as well as the S&P/ASX 200 Index

· over the period 2 February 2005 to 1 February 2012 – the first time period:

· over the period 2 February 2012 to 1 February 2019 – the second time period

1.Calculate the monthly returns of the financial company as well as the S&P/ASX 200 Index for the first time period.

2.Estimate the monthly returns of the financial company as well as the S&P/ASX 200 Index for the second time period.

3.Using the formulae provided in your text book, estimate the average return, market capitalisation, P/E ratios using the excel functions for both the periods.

4.Prepare line graphs plotting the share price history of the financial company and the S&P/ASX 200 Index for the first period as well as the second period.

5.Draw 2 histograms of monthly returns of the financial company for the first period and the second period. Examine to what extent the returns are normally distributed.

6.Discuss your observations, the similarities and the differences between the 2 periods average return and the S&P/ASX 200 Index.

C. Risk analysis using CAPM

1.Do you think standard deviation will be a reliable predictor of risk?

2.Estimate the variance and standard deviations of monthly returns of the financial company as well as the S&P/ASX200 Indexfor both the time periods.

3.Discuss what it tells about the risk as measured by the standard deviation of the financial company and the S&P/ASX200 Index.

4.How does the risk of the bank or financial company compare with that of the market S&P/ASX 200 Indexfor both the periods?

5. Calculate the risk premium (Beta) for both the periods using CAPM measure.

a.Calculate the covariance for both the periods and comment on the extent to which they relate.

b.Provide an explanation for Beta for both the periods.

6. If you think Beta to be a better measure, why do you consider it to be so. Discuss.

Are there any variations between Beta as given in literature and your estimates of Beta for the 2 periods? Discuss your answer based on your findings.

Section D: Changes and recent developments

Provide a commentary of current and recent (within the last year) developments relating to the financial company.

Focus on changes that have had an impact on the share price of the financial company, including but not limited to development and changes relating to:

1.Capital structure

2.Legislative changes impacting the financial company.

3.Competitive pressures.

4.International events.

5.Major suppliers and customers.

6.Management and Ownership Changes.

Section E: Investment recommendation

Make a recommendation as to whether you would buy, sell or hold the shares based on your findings. Your recommendation can include suggested share price levels but should be based on the analysis in sections A-D.

Further instructions:

1.Research Report Word Limit: Maximum 3,000 words excluding graphs and referencing

2.Bibliography and referencing is to be done based on the APA guidelines provided in Learning Commons

3.Any use of previously submitted assignment material from prior semesters will be monitored and will be regarded as plagiarism

4.Marks are allotted for

· Evidence of comprehensive review of extant literature and citing from a range of journal articles

· Use of appropriate analytical tools and financial models

· Clearly developed and considered recommendations and conclusion

· Professional presentation based on:

· Structure

· Referencing

· Academic writing style (expression, grammar, punctuation, usage)

</pclass=”default”>