Advanced Understanding of Contemporary Investment Report Writing – Economics Assignment Help

Assignment Task

Task

This assessment task is a written report that requires students to:

1. Compute and interpret risk-return characteristics of selected international asset classes using the data set provided and make justified and actionable recommendations to the Chief Investment Officer and Board of AlphaWell.

2. Compare and discuss the capital asset pricing model (CAPM) and the single-index model (SIM) and recommend which approach should be utilised by AlphaWell in analysing Australian and Canadian shares.

Case study & Assessment Questions:

AlphaWell is an Australian investment firm that is privately owned by several high-net-worth investors. It is currently reviewing its investment strategy for the next 10-year horizon. Given its heavy exposure to European and Asian financial markets, the Board is focused on diversifying its investment portfolio to include Australian, Canadian, and United States (US) dollars, financial products and commodities. The Board has identified the following five asset classes for further consideration:

1. Australian shares (S&P/ASX 200 Index)

2. Australian 10-year Treasury Bonds

3. Canadian shares (S&P/TSX Composite Index)

4. Oil

5. Gold

The Chief Investment Officer (CIO) has purchased the average annual returns for the above-mentioned five asset classes over the 2002-2021 period from a reputed research house (available in Table 1 in the First Assessment Data File). Assume that AlphaWell can invest in the five asset classes above through specialised exchange-traded funds (ETFs). As the Senior Investment Analyst at AlphaWell, you have been asked by the CIO to prepare a report to the Board addressing the following:

Part A: The risk-return characteristics of five asset classes.

1. Identify the risk-return characteristics of the five asset classes using the arithmetic mean (AM), geometric mean (GM) and standard deviation (?) of their annual returns.

2. Compare them and discuss your findings.

3. Based on your discussion, draw specific and justified recommendations that can be actioned upon by AlphaWell.

Part B: The capital asset pricing model (CAPM) and the single-index model (SIM)

1. What are the differences between the capital asset pricing model (CAPM) and the single-index model (SIM)? [In your CAPM explanation, include an example by calculating the return on a selected share, and compare and benchmark with an index from Table 1 in the First Assessment Data File].

2. Discuss any updates to the original CAPM model and the purpose of each.

3. Include recommendations in your report as to which approach should be utilised by AlphaWell in analysing Australian and Canadian shares.

Part C: Conclusion

Conclude the report summarising the key insights from Part A and B above and noting the limitations of the analyses conducted.

Learning outcomes:

1. Demonstrate advanced understanding of contemporary investment management theory, analytical frameworks and practice.

2. Critically analyse and effectively communicate complex concepts, investment management issues and recommend improvements to inform professional practice.
 

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