INV4801 ASSIGNMENT 2 2026 (236775)

Investments: Portfolio Management - INV4801 Assignment 2 2026 (236775) - Due 19 August 2026; 100 % TRUSTED workings, Expert Solved, Explanations and Solutions. For assistance call or W.h.a.t.s.a.p.p us on ...(.+.2.5.4.7.7.9.5.4.0.1.3.2)........... ASSIGNMENT 02 Due: Wednesday, 19 August 2026, 8:00 PM Unique number: 236775 Answer the following questions and submit your assignment at 1. a) GARCH (1,1) Case study A portfolio manager at a Johannesburg-based investment firm is tasked with managing a fund heavily exposed to the South African Top 40 Index. Following a period of heightened market uncertainty due to geopolitical tensions and fluctuating commodity prices, the firm decides to model daily equity return volatility more accurately using a Time-Varying Volatility-ARCH Models. The portfolio manager gathered the following daily information: α = -0.08, γ = 0.00010, and β = 0.35. Given these parameters, the daily standard deviation is 1%. Suppose the previous period estimated variance was 0.0144, the comparable company estimated standard deviation was 0.012 and the current period return is 7.77% above the expected value. (i) Using re-parameterized GARCH (1,1), compute the conditional variance for today. (6) (ii) Compute the conditional standard deviation for today. (3) (iii) What will happen to the variance if the current return is in line with expectation? (3) b) Khaya and Monde case scenario Khaya and Monde are evaluating the stock returns for two economies: the country of Apple and the country of Borrowdale. Apple is a developed country with mature capital markets and few restrictions on cross border capital flows. Borrowdale is a developing country that puts a restriction on foreign investments in their stock market: as foreign investors may not hold no more than 6% of the outstanding stock of a single firm. Monde has gathered the data below for the two countries. He furthermore uses the ZSEEX world index as the global portfolio and uses financial equilibrium model approach to evaluate the markets. Sharpe ratio of the ZSEEX World Index Standard deviation of the ZSEEX World Index Risk-free rate of return Degree of market integration for Apple Degree of market integration for Borrowdale Standard deviation of Apple stock returns Standard deviation of Borrowdale stock returns 0.26 10% 3.5% 70% 60% 9% 17% Correlation of Apple with ZSEEX World index 0.85 Correlation of Borrowdale with ZSEEX World index 0.64 Estimated illiquidity premium for Apple 0.00% Estimated illiquidity premium for Borrowdale 3.77% (i) Calculate the expected returns, betas and covariance for the two countries’ stock markets. (13) 2. Reuel Tawananyasha scenario As part of an attribution analysis Reuel Tawananyasha, CFA, has accumulated the following partial data for his portfolio. Country Investments Benchmark Weight Benchmark Return Portfolio Weight Portfolio Return Zimbabwe Stocks 10.84% 16.47% 7.67% 16.50% Kenya Stocks 38.92% 25.43% 32.35% 23.16% Nigeria Stocks 34.86% 12.85% 41.16% 11.33% South Africa Stocks 15.38% 35.26% 18.82% 20.00% Total 100.00% 22.67% 100.00% 18.26% For payment of performance bonus, Tawananyasha prefers to use the 7% absolute return as determined at the end of the year as a performance evaluation benchmark. i) Using the available data, calculate and explain the total allocation effects. (6) ii) Using the available data, calculate and explain the total Sector allocation effects. (6) iii) Using the available data, calculate and explain the total allocation /selection interaction. (6) iv) Evaluate the validity of the benchmark that Tawananyasha utilizes in assessing his performance. (7) Godfrey Marozva, CFA DEPARTMENT OF FINANCE, RISK MANAGEMENT AND BANKING © UNISA 2026