Mathematical Finance Project – MF1 An Analysis of global asset allocation during the Covid pandemic. The data set ‘GlobalEquities.R’ contains daily quotes of equity indices from various countries. Your main task is to build and backtest mean-variance portfolios based on these data. Since the portfolio weights depend upon the return’s covariance matrix and the vector of expected returns, you can use the sample covariance (or similar estimate) in the required calculations. You will however use the forecasted (one-step ahead) expected returns as an estimate of expected returns, where the forecasts should be based on appropriate financial time series modelling. You shall use R to perform the analyses. Part A. Oral Presentation The first part of this module is the preparation and delivery of an oral presentation on your project. Tasks: 1) Data visualisation and summary. Explore and describe the patterns in the data by using suitable graphical and statistical methods. 2) Data analysis. a) Construct mean-variance portfolios for various risk appetite parameter values, where the expected returns are forecasted using appropriate models, and evaluate these performances using
appropriate measures. b) Construct long-only equally weighted portfolios for the same risk appetite parameter values considered in a). c) For each value of the risk appetite compare the performances of the two set of portfolios (over rolling windows) by looking at their cumulative returns. Part B. Reports B.1) Group Scientific Report: You are to write a scientific report on your project topic. You must use the template typeset in LaTeX “statistics_template_and_guidance.tex”, which is available on the course DLE site. The report must contain: 1) A write up of your oral presentation including any amendments that follow from the feedback you received. Mathematical Finance Project – MF1 2) An application of at least one additional method that you haven’t employed in Part A. There is a word limit of 5,000 words for your scientific report. B.2) Individual Reflective Report: You are to write a report to reflect your experience in your group project. Your reflective report should be no more than one A4 sides. You should use 12 point Arial font and 1.5 lines spacing. References: A. Cardinali (2018). Financial Statistics, MATH3623 Module Book, University of Plymouth.