Fund Management

INTRODUCTION:

The advantages of worldwide portfolio expansion have been to a great extent acknowledged and perceived by financial specialists as of late. Advantages of portfolio expansion rise up out of the inspiration of minimizing risk and maximising return. One measure of portfolio risk is the portfolio variance. Portfolio variance relies on upon the fluctuation of every asset and their correlation. In this way, covariance assumes a key part in the creation of diversified portfolio. In this study we attempt to spread systematic risk among the diverse segments of stocks. Ten stocks from the distinctive real segments of the Australian Stock Exchange which are exchanged frequently so there is no predisposition for thin line trading have been selected.

This report will investigate the path in which our group built an arrangement of ten stocks and break down how the portfolio responds when diverse stocks are included into the portfolio. Return, beta , variance of each stock and of the portfolios will be analysed and create a finish of what the results were from the portfolio. The reason we have chosen bank stocks and stocks from the mining segment is on the grounds that the size of their commercial ventures and how they attribute to the ASX. Another part of the criteria is that all  the stocks are traded on regular basis, to make sure data is unbiased. Ten Stocks are:

• TELSTRA LTD. - Telecommunication (TLS)
• BHP Billiton LTD – Mining (BHP)
• Commonwealth Bank Limited – Financial (CBA)
• Jb Hi Fi LTD.- Electronics (JBH)
• Fairfax Media – Media (FXJ)
• Westfield Corporation – Real estate (WFD)
• Automotive holdings group – Automobile (AHG)
• AMP – Insurance Companies (AMP)
• Ramsay health care LTD. – Health care (RHC)

RESEARCH:

Objectives of the study:

• Reducing the risk and maximising the return through portfolio diversification.
• Spreading the systematic risk over the main segments of Australian Stock Exchange.
• Study the impact of data on portfolio return.

Data collection:[pic 1]

The market data of stocks have been collected from Yahoo Finance: We have downloaded the daily closing prices for the all ordinary and the ten stocks we  have selected for the period 1 Jan 2008 to 31 Dec 2015.

The daily index and stock mean returns are being calculated using the standard formula: [pic 2]

[pic 3]

  The daily index and stock mean returns are being calculated using the standard formula:[pic 4]

For the beta:

                                         [pic 5]