Choose a publicly listed company on the Australian stock exchange whose ticker begins with your ANZSIC Division

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Question:

Choose a publicly listed company on the Australian stock exchange whose ticker begins with your ANZSIC Division letter from Assessment 2. For example, if you were assigned ANZSIC Division Q, then you can choose a company whose ticker begins with Q, such as QAN. This is your designated stock. Suppose you invest $100,000 in this stock. Download the monthly prices of your designated stock from Jan 2000 to May 2020, inclusive, from Yahoo Finance. Choose a designated stock has been publicly traded since Jan 2000.

(a) Assuming a normal distribution, calculate the 1-month 98% VaR and ES. Interpret these values.

Hint: Use the sample standard deviation and assume it is equal to the population standard deviation.

(b) Calculate the six-month 98% VaR for your designated stock using a bootstrapping procedure in Excel assuming independence in monthly returns. Use 200 bootstrapped samples. Present a histogram of the bootstrap distribution of portfolio values. Comment on your findings.

(c) Suppose you create a portfolio that comprises of $50,000 invested in your designated stock, $25,000 in ^AXJO and $25,000 in CBA.AX. Calculate the six-month 98% VaR for your designated stock using a bootstrapping procedure. Assume independence in returns over time, but that your designated stock may be correlated with ^AXJO and CBA.AX. Use 200 bootstrapped samples. Present a histogram of the bootstrap distribution of portfolio values. Comment on your findings.

(d) Following from (c). Calculate the six-month 98% VaR for your portfolio ($50,000 invested in your designated stock, $25,000 in ^AXJO and $25,000 in CBA.AX) using a block bootstrapping procedure that assumes serial correlation of returns of 3 months. Assume that your designated stock may be correlated with ^AXJO and CBA.AX. Use 200 bootstrapped samples. Present a histogram of the bootstrap distribution of portfolio values. Comment on your findings.