The assignment uses the total return performance of direct property, shares, A-REITs, bonds and cash over 2000-2021.
The assignment uses the total return performance of direct property, shares, A-REITs, bonds and cash over 2000-2021.
Step 1: Download the excel file "Assessment 2 Total Return Index".
Step 2: Perform analysis using the data based on the questions below.
Step 3: Export analysis results (in tabulated form) into Microsoft Word and write comments for relevant questions. Please make sure tables are properly formatted.
Overview
You are required to assess the investment attributes of the Australian property market and other major asset classes by using the quarterly total return index of direct property (and its sub-sectors), shares, A-REITs, bonds and cash.
Details
You are required to assess the investment attributes of the Australian property market and other major asset classes by using the quarterly total return index of direct property (and its sub-sectors), shares, A-REITs, bonds and cash. The total returns data will be available on the unit vUWS site.
Note: All numeric answers must have at least 2 decimal points and 2 significant figures.
Use the geometric mean, not the arithmetic mean in calculating the average return.
Perform analysis for all relevant variables, unless the assets / series are specified.
By using the total return index:
1. Graph the performance trends of direct property, shares, A-REITs and bonds over Dec 1999 - Dec 2021; comment on relevant trends.
2. Graph the performance trends of oice, retail and industrial property sub-sectors over Dec 1999 - Dec 2021; comment on relevant trends
3. Calculate the various quarterly returns for Mar 2000 - Dec 2021. Note: Dec 1999 is the base quarter i.e. index value = 100
4. Based on the results in Question 3, calculate the average quarterly returns for each investment asset for the following time periods:
Mar 2019 - Dec 2021
Jun 2016 - Dec 2021
Pre-GFC: Mar 2000 - Jun 2007
Post-GFC: Sep 2009 - Dec 2021; based on the average quarterly return calculation, comment on their post-GFC performance in comparison to the performance observed in the pre-GFC period.
5. Calculate the average quarterly return and risk for each of these investment assets for the full period: Mar 2000 - Dec 2021; comment and compare the return and risk of these investment assets.
6. Construct the inter-asset correlation matrix for all variables using the Mar 2000 - Dec 2021 data.
7. Based on the analysis in Question 6, explain in-detail on the inter-asset correlations concerning portfolio diversifi- cation for the following scenarios:
are A-REITs shares or property?
which combinations of the three direct property sub-sectors offer (1) the best and (2) the worst diversification benefits?
if an investor has a conventional portfolio of shares and bonds, does the inclusion of direct property enhances diversification benefits?
8. Based on the analysis in Question 6, discuss the inflation-hedging characteristics of direct property, A-REITs, shares and bonds.
9. Based on the analysis in Question 5:
construct the risk-return diagram for these investments
calculate the risk-to-return ratio and return-to-risk ratio for these investments
calculate the Sharpe ratio for these investments. Use Cash as the risk-free investment
comment on the Sharpe ratio performance between direct property, A-REITs, shares and bonds
comment on the Sharpe ratio performance of direct property across the three sub-sectors
10. Based on the results in Questions 5 and 6, calculate the portfolio return and portfolio risk for the following direct property sub-sector only portfolios:
half of the total allocation into oice and the balance is equally allocated into retail and industrial
43% each into oice and industrial, and the balance is allocated into retail
11. Based on the results in Questions 5 and 6, calculate the portfolio return and portfolio risk for the following mixed-asset investment portfolios:
30% bonds / 70% shares
22% bonds / 58% shares / 18% direct property / 2% A-REITs
By calculating the return-to-risk ratio of the two above portfolios, does the inclusion of direct property and A-REITs improves the portfolios risk-adjusted performance?
12. By using the quarterly returns over Dec 2010 - Dec 2021, calculate the beta value and Treynor ratio for each of oice, retail and industrial; use direct property as the market benchmark and cash as the risk-free investment. Discuss the results for these three property sectors in the context of return sensitivity, relative risk and risk-adjusted performance.
13. By using the quarterly returns over Dec 2010 - Dec 2021, calculate the beta value and Treynor ratio for A-REITs; use shares as the market benchmark and cash as the risk-free investment; Discuss the result in the context of return sensitivity, relative risk and risk-adjusted performance.
14. By using the quarterly returns over Mar 2000 - Dec 2021, calculate the tracking error and information ratio for each of oice, retail and industrial; use direct property as the market benchmark; discuss the results for these three property sectors in the context of performance replication and eiciency.
15. By using the quarterly returns over Mar 2000 - Dec 2021, calculate the tracking error and information ratio for A-REITs; use shares as the market benchmark; discuss the result in the context of performance replication and eiciency.
Submission Guideline
Online via Turnitin for the main report [doc / docx ] | Dropbox for the Excel spreadsheet [xls / xlsx].
The main report should strictly be a maximum of 15 pages in length.
The Excel spreadsheet must be a working spreadsheet containing the formula and cell-references.
Use Times New Roman with 12 points font size and 1.5 spacing. Paragraph must be justified.
