Essay ECOM 2001 : Import the Adjusted Stock Prices for the Three Stocks – Economics Assignment Help

Assignment Task:

TASK:

Introduction
The aim of this project is to prepare, evaluate and analyse stock market data and to recommend an optimal portfo- lio consisting of two stocks. You have been assigned three stocks, all three must be included in the analysis which works towards your recommendation of a final optimal portfolio. The project requires a deep understanding of both the statistics and the mathematics components of this unit. It is recommended that you work on this on a weekly basis.
Refer to the rubric at the end of this document to understand how this assessment will be graded. In particular, note that all figures need to be numbered and labelled, and you need to include all the steps to involved with arriving at each of your answers.
Your final report should be a pdf document. An RMarkdown document to get you started is available on the unit Blackboard site. Show all of your coding by keeping echo = TRUE. Make sure to update your name and student ID in the YAML of the document.
Import Data
Import the adjusted stock prices for the three stocks which you have been assigned. See the Markdown file for hints.
The Analysis
Plot prices over time

• Plot the prices of each asset over time separately. Succinctly describe in words the evolution of each asset over time. (limit: 100 words for each time series).
• Calculate returns and plot returns over time
• Calculate the daily percentage returns of each asset using the following formula:

Where E(r) is the expected return of the portfolio, and Var(r) is the variance of the portfolio.1
Given your values for E(r1), E(r2), Var(r1), Var(r2) and Cov(r1, r2) which portfolio would you recommend to the investor? What is the expected return to this portfolio?
Provide evidence to support your answer, including all the steps undertaken to arrive at the result. (*Hint: review your notes from tutorial 6 on portfolio optimisation. A complete answer will include the optimal weights for each possible portfolio (pair of stocks) and the expected return for each of these portfolios.)
The impact of financial events on returns

• Two significant financial events have occurred in recent history. On September 15, 2008 Lehman Brothers declared bankruptcy and a Global Financial Crisis started. On March 11, 2020 the WHO declared COVID-19 a pandemic. Use linear regression to determine if
• Any of the stocks in your data exhibit positive returns over time.
• Either of the two events had a significant impact on returns.
• Report the regression output for each stock and interpret the results to address these two questions. How would you interpret this information in the context of your chosen portfolio?
• mmatical errors.