You are required to conduct a stock market simulation for a period of four weeks (week 4 - week 7). This is a group project which may consist of five members only. Each group will be allocated a cash amount of RM150,000 to trade in the chosen company's shares in Bursa Malaysia. The numbers of trading are restricted to minimum of two to maximum of six in four weeks. All shares are expected to be sold by the end of the week four to realize capital gains/losses. Prior to trading, you are advised to review the past performance of the company chosen and other materials to enhance the share investment return, and eventually make the experience more rewarding.
Prior to trading, you should conduct research on some potential companies (3 to 5) of your choice in order to select one to trade to maximize your return as an investor.
Risk and Return:
the closing share price (in the beginning of each month) of the company you have selected and;
the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) for the past months from May 2011 until June 2012.
a) Calculate the average monthly returns for your company and the FBM KLCI from Bursa Malaysia.
b) Calculate the standard deviation of the monthly returns for your company and the FBM KLCI.
c) Calculate the covariance and correlation between the monthly returns of your company and the FBM KLCI.
(d) Comment on your findings in Part 1(a), (b) and (c).
2. Capital Asset Pricing Model (CAPM):
a) Calculate the beta for your company.
b) Determine the risk free rate and calculate the required rate of return for your company using the Capital Assets Pricing Model.
c) Evaluate the sensitivity of your company's systematic risk, and recommend how it could be managed.