MGMT20005-Business Decision AnalysisAssignment 2: Group Assignment
Introduction: This is a group assignment of up to 3 students (1-3 students) from the same tutorial group. You are alsoallowed to form a group with students of the same tutor. Note that if the group isformed with students of differenttutors, you will receive zero marks for this assignment. You can complete your assignment individually, if you wish,however, you are strongly encouraged to completethisassessment in a group setting.Weight: 30% of the total mark.Format: PowerPoint file (.pptx/.pdf) + Recorded presentation (.mp4) + Excel workbook (.xlsx)Due date: 6pm Week 11, Friday October 13, 2023.Submission: Only one submission (with all your files) is required for each group. Make sure you include the names andstudent numbers for all team members on the front slide of your PowerPoint file submission!Late submission: It will attract a marking penalty. A 10% penalty will be applied for every day of late submission for up
to 3 days. Assignments submitted later than 3 days after the due date will not be marked and will receive no mark.Special Consideration: No extension will be provided for this assignment (since this is a group submission nosubmission will be provided even for individual work).
Submission format and word limit:
- Prepare your submission using Microsoft PowerPoint (or similar presentation software is also okay). You canuse up to 30 slides and up to 2,500 words in your slides altogether (excluding figures, tables, references, andappendices). Your slides should be well-organised, coherent, and visually appealing. Note that it is importantto cover all below the requirements in your submission.
- A maximum of 5-minute recorded presentation outlining your analysis and assessment of your portfoliooptimisation methods used. You may choose to use the same deck of slides that you and your group have puttogether (or a revised slide deck) if you find this suitable and appropriate for the 5-minute presentation. Youmust submit an .mp4 file (or similar) for your video presentation and it is a requirement to show your face/s inyour presentation recording.
Assignment Details
This assignment is designed to let you explore and evaluate a number of approaches for portfolio optimisation, usinglive real-world data from the Yahoo finance website. The relevant URL for finding stock prices ishttps://au.finance.yahoo.com/. Under the “Quote lookup”, you can search for the industry/business you areinterested in to explore investment (assets).Portfolio Optimisation - Risk and Return: Aninvestment portfolio consists of a collection of investment items (orstocks or assets) held by an individual or organisation, in which the investor seeks to purchase a variety of assets togain a good return (profit) through increasing assets value. Individual assets vary in value from minute to minute, andwhilst over time, they might grow in value, their value fluctuates over time. The possibility of such fluctuationsrepresents a risk to the investor. Accordingly in portfolio selection, investors should wisely choose to invest across arange of assets, ideally those total value is less liable to fluctuation than the individual assets.In this assignment, you are required to use asset return data from a period of 4 years toidentify the optimumportfolio using a variety of different optimisation methods. The assignment report (slides) should include three main
sections: Preliminary Work, Optimisation Models and Conclusion. Therequirements of each part are detailed below.The breakdown of marks (a total of 30) is given on this document and as a Rubric in Canvas.MGMT20005-Business Decision AnalysisAssignment 2: Group AssignmentPage | 2Preliminary Work (4 marks: Data collection + Classifications)The first stage is to identify a set of 10 investment items from which you will subsequently determine optimumportfolios using various optimisation models. You may select any global assets (including indices) whose data isprovided on the Yahoo finance website. After you searched for the stock under the “Quote lookup”, go to the“Historical data” tab, then choose the appropriate Time period, and Frequency before downloading the data.The chosen assets must satisfy the following general conditions:? Each must have at least 48 months (August 2019 - August 2023) of monthly dataavailable, up to andincluding August 2023.? They should be selected from any 3 different sectors/categories of your choice (let’s called them C1, C2,and C3) e.g., banking, pharmaceuticals, media,technology,government bonds, property trusts, etc., with atleast 2 assets in each category.? You need to calculate the monthly return of each asset by(Stock_value_newStock_value_old)/(Stock_value_old). Then the average return of anasset is the mean of return of that asset
over the 48 months. Similarly, the risk is calculated as the standard deviation of return over 48 months. Asample Excel file is provided that includes a sample data with the calculation of return and risk.
? Data should span a reasonable range of volatilities/risks. Classify the assets into 4 groups according to(ascending) risk (let’s call them R1, R2, R3, and R4). A simple classification approach would be to calculatethe standard deviation of each asset (as explained in the previous dot point) and define risk categoriesbased on the 4 quartiles. Therefore, R1 should include investment stocks with thelowest risk (loweststandard deviation).? Recall that each asset lies in one of the Rs and in one of the Cs.Optimisation ModelsThe assignment requires you to consider two different optimisationtechniques: linear programming and integerlinear programming. For each optimisation model, explain the optimisation approach taken, the mathematicalformulation and identify how the Excel Solver is to be used (explain any constraints used – e.g., that a variable needsto be an integer or binary).? LP model (11 marks: Mathematical Model + Excel Solver and Reports + Discussion): In this approach, the aim isto achieve the maximum overall return of the portfolio, subject to specified requirements on risk mix(percentages in R1 to R4) and category mix (percentages in C1 to C3). Note that the overall return of a portfolio(or its expected return) iscalculated as a weighted average of the expected returns of allassets, where theweights represent the proportions of theportfolio that should be invested in each asset.The following investmentguidelines are to be applied to the Linear Programming model:
- Investment in the highest-risk assets shouldn’t exceed 15% of the portfolio, while the lowest risk assetshould have the highest investments among all other risk categories.MGMT20005-Business Decision AnalysisAssignment 2: Group AssignmentPage | 3
- The ratio investment in R2 to R3 must be at least 2 to 1.
- To ensure diversification, each sector category must have a minimum of 20% invested; apart from one sectorthat you choose (your discretion) to have a minimum of 30% invested.
- The minimum investment in each asset should be 10%.Use Excel’s reports to comment on binding constraints, and the impacts of changes to the risk and categoryconstraints on the optimum portfolio (sensitivity analysis). Further, if an asset(s) is not selected in your optimalsolution, explain how much its return should be changed, so that asset can be included in your optimal selection.? ILP model (6 marks: Mathematical Model + Excel Solver and Discussion): In this approach, we assume that abalanced portfolio of exactly 6 stocks is to be chosen. The 3 asset categories (the C classification) must be
included. In addition, at most 1 of the assets can be in the riskiest group, and at least 2 must be in the least riskygroup. Finally, an asset from R3 can be selected only if at least one asset from R2 is selected.Conclusion (4 marks: comparison + conclusion + overall presentation)Summarise your work (of all the above parts), present all your results comparatively, coherently and compellingly.Then, based on your assessment of the various approaches, briefly explain a strategy that you might prefer to use forthis portfolio optimisation problem. Include a summary table detailing each chosen portfolio and the basis of choice,compare each of your chosen portfolios.Recorded 5-minute Presentation (5 marks)Your task is to create a concise 5-minute recorded presentation about portfolio optimisation strategies.
You can imagine you are addressing a distinguished panel ofexecutives at a leading investment firm. Begin byproviding a comprehensive overview of your carefully selected 10 investment items,showcasingyour keenunderstanding of the market landscape. Afterward, briefly explain a preferred portfolio optimisation strategy,providing reasons for your choice and including a summary tablecomparing each selected portfolio. Thispresentation should showcase your understanding of investment strategies and your ability to communicate themeffectively. You may choose to use the same deck of slides that you and your group have put together to supportyour presentation, if you find this suitable and appropriate.Begin by providing an overview of your 10 investment items and then assess the two approaches you have examinedabove using real-time data from Yahoo Finance. Afterward, brieflyexplain a preferred portfolio optimisation
strategy, providing reasons for your choice and including a summary table comparing each selected portfolio. Thispresentation should showcase your understanding of investment strategies and your ability to communicate themeffectively. You may choose to use the same deck of slides that you and your group have put together to support
your presentation, if you find this suitable and appropriate.You must submit an mp4 file (or similar) for your video presentation.We recommend using Zoom (see ZoomRecording Basics) to record your video presentation, but you may use another tool of your choice and then uploadthe video file into Canvas in the submission tool with your presentation slides. It is a requirement to show yourface/s in your presentation recording.MGMT20005-Business Decision AnalysisAssignment 2: Group AssignmentPage | 4
Marking guide
Assignments will be marked based on the methodologies adopted and the quality of work. Given the vast range ofassets to select from on the Yahoo website, it is highly unlikely that you will choose the same portfolio of stocks asanother student group.It is important to pay special attention to spelling, grammar, and punctuation to avoid ambiguity and confusion.Students can include relevant graphs, tables, and other exhibits such as appendices. They must be clearly labelled andwill not be included in the word count.Marking SchemeforAssignment1 Files MarksPrelim – 4 marksData acquisition, background and description Excel & PowerPoint 2Classifications,explanation of procedure Excel & PowerPoint 2Linear Programming – 11 marksMathematical model PowerPoint 3Solver, results and discussion Excel & PowerPoint 4Sensitivity Analysis and discussion Excel & PowerPoint 4Integer Linear Programming – 6 marksMathematical model PowerPoint 3Solver, results and discussion Excel & PowerPoint 3Overall Discussion and Conclusion – 4 marks
Comparison, conclusion, and overall presentation PowerPoint 4Recorded Presentation – 5 marks MP4 file 5TOTAL – 30 marks 30Feedback prior to submission: Students can seek assistance from the teaching staff to ascertain whether theirassignment conforms to submission guidelines through:- Discussion board (Canvas): as other students can also benefit from your questions and replies.- Consultation: with prior arrangement with your tutor or lecturer.Feedback after submission: Your assignment feedback will be returned within two weeks of the due date in a rubricon the LMS site with an overall mark and intext/overall comments.