CAPM and the influence of sectoral affiliation on stock performance in pre- and post-COVID periods BUS-32G

CAPM and the influence of sectoral affiliation on stock performance in pre- and post-COVID periods

Assignment Instruction Document

Unit Name: Investment Analysis

Unit Code: BUS 32G

Lecturer: Tanvir Bhuiyan

Due Date: 16 May

Submission Format: MS Word Report + Excel File

Weighting: 20%

Internal Students: This assignment will be completed in groups of three.

External Students: This assignment will be completed individually, requiring submission of a written report.

Background Information

The initial cases of COVID-19 were identified in Wuhan, China, in mid-November 201G. Subsequently, the World Health Organization (WHO) declared the outbreak a Public Health Emergency of International Concern on January 30, 2020, and later classified it as a global pandemic on March 11, 2020. The Global Industry Classification

Standard (GICS) categorizes businesses into 11 primary sectors

(Health/Industrial/Energy/Utility/Material/Information Technology/Consumer Discretionary/Consumer Staples/Real Estate/Communication

Services/Financials), each of which responded to the COVID-1G pandemic in distinct ways.

Assignment Objective

The objective of this assignment is to analyse how Australian stocks listed under ASX in these sectors responded to the COVID-19 pandemic by conducting a comparative

analysis of expected stock returns in the pre-COVID and post-COVID periods using the Capital Asset Pricing Model (CAPM).

Stock Selection Criteria

• Internal Students: Choose three stocks, each representing a different GICS sector excluding Financials sector.


• External Students: Select one stock from any of the eleven GICS sectors, excluding the Financials sector.

Task Description: CAPM-Based Sectoral Analysis

Apply the Capital Asset Pricing Model (CAPM) to estimate the expected return for each selected stock across different sectors in both pre-COVID and post-COVID periods. To empirically derive the results, utilize Ordinary Least Squares (OLS) regression to estimate beta (?beta?) and assess its impact on expected returns. Upon completing the analysis, critically evaluate the findings, highlighting sectoral variations in stock performance. This study will offer valuable insights for investors, enhancing their understanding of sectoral resilience and market dynamics in response to the pandemic. Additionally, it will emphasize the role of systematic risk and expected returns, as predicted by the CAPM framework, in shaping investment decisions. You may follow the guidelines below to successfully complete this assignment.

1. Define pre-COVID and post-COVID


2. Obtain daily adjusted closing prices for each stock for both pre-COVID and post-COVID periods from Morningstar (See attached document -how to download data in the assessment block of your LMS)


3. Obtain daily adjusted closing prices for ASX market index (ASX 200) for both pre-COVID and post-COVID periods. You can use Yahoo Finance for this or refer to the link below

https://www.marketwatch.com/investing/index/xjo/download- data?countrycode=au

4. Retrieve risk-free rate data for both pre-COVID and post-COVID periods. A data file named risk free rate has been attached in the assessment block of your LMS.


5. Convert price data into daily returns for both pre-COVID and post-COVID periods stock price and ASX market index using the formula:

6. Compute daily excess returns for each stock and the market

7. Estimate beta (?) by running the following Ordinary Least Squares (OLS) regression for each Use Excel.

8. Use the CAPM equation to calculate expected Utilize beta obtained from step 8.

How to structure your assignment:

• Executive Summary: Executive Summary (ES) should reflect concisely the contents of the entire It should include a brief description of the issue investigated, background information, a very brief analysis, and a conclusion.

• Introduction: The introduction sets the stage for the rest of the After reading this section, a reader should have a clear idea of what to expect from the report, that is, what the report is going to address. It should also give an overview of the structure of the report.

• Identification of the issue(s): In this section, provide a background on the selected topic by referencing previous research and positioning your study within that For instance, after reviewing the existing literature on CAPM and the influence of sectoral affiliation on stock performance in pre- and post-COVID periods, you may introduce your study by stating: "Given the inconclusive findings in prior research, this report aims to further examine..." This approach will establish the relevance of your investigation and highlight the research gap your analysis seeks to address.

• Analysis: This section includes analysis of your data


• Conclusion: This section summarises what has been discussed in the This is about reminding the readers about the issue you addressed in this report.

Please see the marking rubric for other guidelines.

Format:

The word limit for the written report is 2500 words (Internal Students) and 1500 words (External Students)

The report must be fully referenced using the APA style of referencing. Details of this method can be found at: https://libguides.murdoch.edu.au/APA.

The report must:

• be typed using Word


• be double-spaced


• use Times New Roman font, size


• have normal

A Group Project Plan outlining the information discussed above must be included as an appendix to your report. It will not be graded but will be used for conflict resolution procedures if required. A template for your plan is provided on LMS.

Electronic assignment submission

Use the submission link in the Assessment section to submit the following files:

• Written report in Word document


• Excel file containing the data used in the

Use a unique filename which follows the convention: Unit Code_AssignS125_ID, where S125 stands for Semester 1 2025. For example, BUS329_AssignS125_12345678, where 12345678 is the student ID of the student submitting the assignment Please note that only one assignment should be submitted for each group.