WEBVTT

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Welcome to cloning exercise 60 and we are here to at their sport and our exercise this file is still

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on the desktop and the Serbian part to financial data analysis.

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And here we select the top of the notebook for coding exercise 16

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and coding exercise 16 is all about the application of modern portfolio theory and asset pricing.

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So let's have a look here first of all you have to import the data sets the U.S. stocks with six single

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stocks and the S&P 500 Total Return and you chose to select a five year period.

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And finally you should at the price data of the S&P 500 index to the data frame with the six stocks.

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So you should create the adjusted net column market portfolio so the S&P 500 is here.

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The market portfolio the applicable.

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And then you are asked to calculate the simple daily returns for the six stocks and the market portfolio

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and calculate annualized the risk and return.

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And also here you can use a user defined function annualized the risk and return.

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And again you should assume that the risk return is one point seven percent.

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And with this you can calculate the following metrics for the six stocks and for the market portfolio.

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So the sharp ratio then the total risk and variance units and the annualized covariance matrix and also

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systematic risk and systematic risk beta and then the required return as per the cap M model.

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And finally also the alpha.

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And then you're asked to visualize systematic risk and and systematic risk for stocks and the market

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portfolio in a bar chart.

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And the question is which company most likely showed the highest portion of company specific risk.

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That can be diversified away in the market portfolio.

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And finally you should also visualize these security market line and determine the stocks that underperformed

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and over performed the market in terms of systematic risk return.

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So in a cap and framework and also you can find that guided and instructed option and also the hint

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section at the very end so that's the coding exercise 60 and I hope you have fun and feel free to have

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a look at these solutions notebook and solutions video by.