ASX Portfolios
Executive summary
The report presents the analysis which is related to the risk and expected return of share portfolios of two stocks from the ASX in Australia. There are two approaches which refer to Mean-Variance and CAPM model to be applied in the analysis of the portfolios in this report. The two stocks which construct the portfolio are Asia Pacific Holdings Limited (AXA) and Caltex Australia Limited (CTX).Each stock occupies a certain proportion in one portfolio and their weights are varied in different portfolios. The rule of the portfolio construction is basis on varying the weights of each portfolio at 2.5% intervals. Then through the calculations and theoretical research which is related to the two approaches, the recommendation can …show more content…
In other words, the higher return matches the higher Beta. Therefore, under the CAPM approach, there is no best recommendation which can help investors to gain the best selection of the portfolio of the stocks. In respect of the portfolios in which AXA shares and CTX shares occupied with different proportions, the range of Beta is from 0.916153928 to 1.138425255 which matches the scope of the expected return from 0.7301% to 0.7948%.The selection of optimum portfolio for each investor is diverse, it depends on the extent to which the level of risk and expected return are accepted by every investor. For example, if an investor who desire the highest returns and does not care about the risk from the portfolio of the two stocks, the portfolio in which AXA occupies 100% and CTX accounts for 0% should be chose because it possesses the highest …show more content…
Steinbach, 2001, Markowitz Revisited: Mean-Variance Models in Financial Portfolio Analysis, SIAM Review, Vol.43 no.1, pp31-85
Alex Frino, Amelia Hill, Zhian Chen, 2009, Introduction to Corporate Finance, 4th edition, Pearson Education Australia
Haim Levy, 2010, The CAPM is Alive and Well: A Review and Synthesis, European Financial Management, Vol. 16 no. 1, 2010, pp 43-71
Conway L. Lackman, 1996, Exchange Risk: A Capital Asset Pricing Model Frame- work, Journal of Financial and Strategic Decisions Vol.9 no.1
Timothy J. Brailsford, Robert W. Faff, Barry Oliver, 1997, Research Design Issues in the Estimation of Beta, Vol.1
Fama, EF, and French KR,1992, The Cross-Section of Expected Stock Returns.” Journal of Finance, Vol 47,pp427-465.
Fama, EF, French KR, 2004, The Capital Asset Pricing Model: Theory and Evidence, Journal of Economic Perspectives, Vol 18 no 3, pp
The report presents the analysis which is related to the risk and expected return of share portfolios of two stocks from the ASX in Australia. There are two approaches which refer to Mean-Variance and CAPM model to be applied in the analysis of the portfolios in this report. The two stocks which construct the portfolio are Asia Pacific Holdings Limited (AXA) and Caltex Australia Limited (CTX).Each stock occupies a certain proportion in one portfolio and their weights are varied in different portfolios. The rule of the portfolio construction is basis on varying the weights of each portfolio at 2.5% intervals. Then through the calculations and theoretical research which is related to the two approaches, the recommendation can …show more content…
In other words, the higher return matches the higher Beta. Therefore, under the CAPM approach, there is no best recommendation which can help investors to gain the best selection of the portfolio of the stocks. In respect of the portfolios in which AXA shares and CTX shares occupied with different proportions, the range of Beta is from 0.916153928 to 1.138425255 which matches the scope of the expected return from 0.7301% to 0.7948%.The selection of optimum portfolio for each investor is diverse, it depends on the extent to which the level of risk and expected return are accepted by every investor. For example, if an investor who desire the highest returns and does not care about the risk from the portfolio of the two stocks, the portfolio in which AXA occupies 100% and CTX accounts for 0% should be chose because it possesses the highest …show more content…
Steinbach, 2001, Markowitz Revisited: Mean-Variance Models in Financial Portfolio Analysis, SIAM Review, Vol.43 no.1, pp31-85
Alex Frino, Amelia Hill, Zhian Chen, 2009, Introduction to Corporate Finance, 4th edition, Pearson Education Australia
Haim Levy, 2010, The CAPM is Alive and Well: A Review and Synthesis, European Financial Management, Vol. 16 no. 1, 2010, pp 43-71
Conway L. Lackman, 1996, Exchange Risk: A Capital Asset Pricing Model Frame- work, Journal of Financial and Strategic Decisions Vol.9 no.1
Timothy J. Brailsford, Robert W. Faff, Barry Oliver, 1997, Research Design Issues in the Estimation of Beta, Vol.1
Fama, EF, and French KR,1992, The Cross-Section of Expected Stock Returns.” Journal of Finance, Vol 47,pp427-465.
Fama, EF, French KR, 2004, The Capital Asset Pricing Model: Theory and Evidence, Journal of Economic Perspectives, Vol 18 no 3, pp