Investment in Public Equity
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Investment in Public Equity: Final Individual Assignment
There are FOUR questions in this assignment.
Please start the answer to each question on a separate page.
The necessary data for question 4 is in Excel file: Assignment_data.xlsx
Submit written answers to all questions (preferably in pdf file). Each question is 25 points in total.
Most of the questions indicate a suggested length of an answer. This is only a guidance for students.
For question 4, submit also the underlying calculations in form of an Excel file OR a code in a
programming language of your choice (preferably MATLAB, Python, or R). The Excel spreadsheet OR
the programming code serves as students’ additional opportunity to demonstrate their individual
effort.
Disclaimer: Note that the numbers and data provided are from sources (WRDS, CRSP,
Yahoo.com/finance and Kenneth French website) that are available publicly or through university
library and are further adjusted for the purpose of this assignment. The numbers and data are
provided purely for the purpose of this assignment and no judgment on the performance of the funds,
funds’ current or past managers should be done beyond the scope of this assignment.
1. Academic research over the last few decades has shown that there seems to be a number of so-
called anomalies which have delivered superior returns. [25 points]
a. Describe one such anomaly that has been documented to deliver on average superior returns and
is based purely on selecting stocks on their past performance. (Hint: Describe the selection rule, which
stocks are expected to perform better and which worse. Describe how this anomaly can be
implemented in a trading strategy.) (Suggested length of the answer is ca. five lines.) [5 points]
b. Describe one such anomaly that has been documented to deliver on average superior returns and is
based on valuation metrics. (Hint: Describe the selection rule, which stocks are expected to perform
better and which worse. Describe how this anomaly can be implemented in a trading strategy.)
(Suggested length of the answer is ca. five lines.) [5 points]