FIN 202 Project Page 1 of 2

FIN 202: Quantitative Methods in Finance

Instructor: Mr. William White, CFA
WWHITE3@depaul.edu
Spring 2013

PROJECT REQUIREMENTS Part 1

Performance measures of each the seven stocks - overall and each of two sub-
periods
(7 points)
For the overall and each of two sub-periods
(You will be given an appropriate risk free rate to use)
Median return
Arithmetic average return
Geometric average return
Sharpe ratio (note requires calculation of the SD for each asset)
Probability of losing money ON AVERAGE (requires SE calculation)

Performance measures of the portfolio AND the S&P
overall and each of two sub-periods (2 points)
(You will be given an appropriate risk free rate to use)
Median return
Arithmetic average return
Geometric average return
Sharpe ratio (note requires calculation of the SD for each asset)
Probability of losing money ON AVERAGE (requires SE calculation)

PROJECT REQUIREMENTS Part 2

Diversification of the portfolio (2 points)
Complete a correlation table for the overall, first, and second time periods. (1 point)

Based only on the correlations, would you say your portfolio is diversified? Did that
change over time? (0.5 points) You must EXPLAI N your answer.

Is that answer different than what see using the SD of the portfolio? (0.5 points) You
must EXPLAI N your answer.


Differences in means and SDs (You must EXPLAIN your answers.) (6 points)
Complete the template and answer the questions presented there.


Betas (6 points)
CAPM regression model for the portfolio JUST for the time period you picked in the
previous section. (3 points)

FIN 202 Project Page 2 of 2
Compare the general fit of the regression using the appropriate statistic. A simple
comparison of the key statistic will do; no formal statistical test is required. What do
your answers imply? (1 point)

Based on your time period answer in the Differences in means section, is your Alpha
for that time period statistically significantly different than 0? What does your answer
imply? (1 point)

Is your Beta for that time period statistically significantly different than 1? What does
your answer imply? (1 point)



Recommendation (6 points)
Make a recommendation (Portfolio or the S&P) taking into account EVERYTHING you
pulled together in this project. Defend your recommendation using THREE pertinent
and correctly interpreted results from the wealth of information you uncovered.

NOTES: As always, you must consider both return and risk. Remember that several
statistics do in fact incorporate both. The recommendation most be based on the
pertinent time period relevant for your portfolio however you may decide that the
directional change from period one to period two is an important feature as well. Above
all the three items MUST make sense from a statistical point of view as well as a
logical point of view.


General Look and Feel (Up to 2 points can be deducted for difficult to read projects)
Based on readability, use of tabs, fonts, labels, formulas, and other formatting items that
improve the presentation. Formulas need to be used where appropriate (not calculating
the value outside of Excel and then typing in the result).


FINAL NOTE
Your answers MUST be entered in the Answers worksheet (to be provided on D2L) in
order for me to grade them. Failure to do that will result in a 3 point project deduction.
You may get partial credit for items incorrectly computed, so be sure I can easily find
where you got that answer from in case I need to go back and check your formula.