Assignment Remit
Programme Title
Department of Economics
Module Title
LM Economics of Financial Markets and Institutions
Module Code
07 40063
Assignment Title
Individual Project
Level
LM-Masters Level
Weighting
25%
Module Leader(s)
Domenico Moro
Hand Out Date
14/10/2025
Deadline Date & Time
08/12/2025
12pm
Feedback Post Date
16th working day after the deadline date
Assignment Format
Report
Assignment Length
750 words
Submission Format
Online
Individual
Module Learning Outcomes:
This assignment is designed to assess the following module learning outcomes. Your
submission will be marked using the Grading Criteria given in the section below.
• Portfolio Analysis and Optimization: Students will be able to perform portfolio optimization
using Stata, demonstrating proficiency in the practical application of financial econometrics to
construct portfolios that meet specific risk-return criteria, including the Global Minimum
Variance Portfolio and the Optimal Risky Portfolio.
• Critical Evaluation of Financial Models: Develop the ability to critically analyse and
interpret the results from financial models such as the CAPM, assessing their implications in
the real-world setting of financial markets and institutions.
• Data Analysis Skills: Gain hands-on experience in handling real-world data by downloading,
analysing, and interpreting financial data from sources like Yahoo Finance, using tools to
compute descriptive statistics, correlations, and regression analyses pertinent to financial
markets.
• Communication of Financial Analysis: Enhance the ability to clearly articulate financial
analysis and recommendations through structured reporting, including the proper
presentation of statistical data, graphs, and investment strategies in a professional report
format.Grading Criteria / Marking Rubric
Assessment criteria can be found on the final page of this document.
Ethical Use of Generative AI (GenAI)
You are not permitted to use GenAI to support your submission for this assessment.
You may not submit any work generated by an AI tool as your own.
Plagiarism, including that which results from using GenAI, is a form of academic misconduct
that will be dealt with under the University’s Code of Practice on Academic Integrity.
https://intranet.birmingham.ac.uk/as/registry/policy/conduct/plagiarism/index.aspx
University guidance on ethical use of GenAI can be found here:
https://intranet.birmingham.ac.uk/as/libraryservices/asc/student-guidance-gai.aspx
Feedback to Students:
Both Summative and Formative feedback is given to encourage students to reflect on their
learning that feed forward into following assessment tasks. The preparation for all
assessment tasks will be supported by formative feedback within the tutorials/seminars.
Written feedback is provided as appropriate. Please be aware to use a web browser and
not the Canvas App as you may not be able to view all comments.
Plagiarism:
It is your responsibility to ensure that you understand correct referencing practices. You are
expected to use appropriate references and keep carefully detailed notes of all your
information sources, including any material downloaded from the Internet. It is your
responsibility to ensure that you are not vulnerable to any alleged breaches of the
assessment regulations. More information is available at University’s Code of Practice on
Academic Integrity
https://intranet.birmingham.ac.uk/as/registry/policy/conduct/plagiarism/index.aspx.
Wellbeing, Extensions and Extenuating Circumstances:
The processes for extensions and extenuating circumstances (ECs) are to support students
who have experienced unforeseen issues that have impacted their ability to engage with
their studies and/or complete assessments. Students should notify Wellbeing of any
extenuating circumstances as soon as possible via the online form, following the guidance
provided.
https://intranet.birmingham.ac.uk/social-sciences/college-services/wellbeing/index.aspxMarking Rubric:
Note that the information below is guidance and feedback only and not a quantitative measure to calculate the grade.
The final grade represents the overall quality of the work taking these criteria into account but is the academic judgement of the marker(s).
Mark awarded
First Class
70-100%
Provides very clear and highly accurate analysis.
Presents relevant arguments in a manner that demonstrates a highly
developed understanding and capacity for independent thought.
Overall, exhibits excellent knowledge of the subject matter.
Upper Second
Class
60-69%
Provides clear and accurate analysis.
Presents relevant arguments in a manner that demonstrates a well
developed understanding and capacity for independent thought.
Overall, exhibits good knowledge of the subject matter.
Lower Second
Class
50-59%
Provides fairly clear and mostly accurate analysis.
Presents moderately relevant arguments in a manner that demonstrates a
reasonable level of understanding and capacity for independent thought.
Overall, exhibits satisfactory knowledge of the subject matter.
Third Class
40-49%
Provides vague analysis which contains errors.
Presents moderately relevant arguments in a manner that demonstrates a
limited understanding and capacity for independent thought.
Overall, exhibits patchy knowledge of the subject matter.
Fail
<40%
Provides highly vague analysis which contains numerous and significant
errors.
Presents irrelevant arguments in a manner that demonstrates very little
understanding and capacity for independent thought.
Overall, exhibits poor knowledge of the subject matter.LM Economics of Financial Markets and Institutions
Project Report
1 Introduction
❼ Your report should show the optimal allocation of assets (risk-free and risky assets) based
on the optimizations.
❼ Choose five companies of your choice, making up your portfolio.
❼ This is an individual project so I expect that you work independently. Please do not
choose the same portfolios or report very similar comments; any cooperative work will be
penalised.
❼ You must upload TWO files on Canvas:
1. Your report in Word or PDF format.
2. The Stata do file so that I can replicate your results.
❼ The report should not exceed 750 words; tables and graphs are not included in the word
count. Please include the word count at the top of your document. A penalty of 5
❼ The report counts for 25% of the final mark.
❼ The deadline for submitting the project is clearly indicated on Canvas and on
the remit.
2 Report Organization
❼ You should analyze your data using Stata. During Week 6, which is the assessment
support week, the lecture will focus on preparing for the project. A ”do file” containing
necessary commands, along with a recording of the Week 6 lecture that explains how to
execute these commands, will be available on Canvas in the ’Project’ section.
❼ The report that you submit should be organized as a literate response to the questions,
divided in paragraphs that can be understood by someone who didn’t just read the
questions.
❼ Include your basic numerical results and graphs in your paragraphs along with the ap
propriate analysis and interpretation of them.
❼ Providing solely the calculations is NOT acceptable. A discussion of your findings,
comparisons of the results, possible explanations for any differences found, and finally
your recommendations for an investor wanting to hold this portfolio are essential.
❼ Please edit tables and graphs from Stata before inserting them in the document.
University of Birmingham | Page 1LM Economics of Financial Markets and Institutions
❼ Tables and graphs should be numbered, have a meaningful title, and an explanatory note
at the bottom.
❼ The significance level of the coefficients must be indicated with an asterisk next to the
coefficient, according to the significance level: * 10%, ** 5%, *** 1%.
3 Points to Discuss in the Report
1. Download monthly prices, from January 2014 through December 2023, on the market as
a whole and on five individual stocks (for different industries) of your choice from Yahoo
Finance. Briefly describe the stocks that you have selected.
2. Graph the time series of the prices.
3. Compute the returns using the closing prices:
rt = ln P
t
P
t−
1
× 100
4. Compute descriptive statistics (mean, standard deviation, maximum, and minimum) of
the returns and report them in a table.
5. Look at the correlation and report the results in a table with the significance levels.
6. Get the frequency histograms of your returns.
7. Estimate and plot the linear relationship between each of your assets’ returns and the
market returns.
8. Estimate the CAPM (reporting the results in a table):
E(˜rj ) = rf + βj
[E(˜rM) − rf ]
The annual risk-free rate is 2.4%.
9. Compute the following portfolios and report them in a table (one portfolio per column)
indicating the weights, the expected return of the portfolio, the standard deviation of the
portfolio, and the Sharpe ratio:
❼ The Global Minimum Variance Portfolio (GMVP), i.e., the portfolio that lies to the
far left of the efficient frontier and is made up of a portfolio of risky assets that
produces the minimum risk for an investor.
❼ Compute four portfolios: three choosing appropriate increments of the required re
turn above the GMVP and one with the maximum return.
University of Birmingham | Page 2LM Economics of Financial Markets and Institutions
❼ The optimal risky portfolio, i.e., the one at tangency between the efficient frontier
and the capital market line.
10. Plot the efficient frontier on a return-risk diagram for a long-only constraint, not for
long-short (where short selling is permitted).
11. Plot the optimal risky portfolio tangent to the capital market line. Do so for both a
long-only constraint .
University of Birmingham | Page 3
