BE313: Explain the concept of total risk of a security and the two risk components: systematic risk and unsystematic risk: portfolio analysis Assignment, UOE, Singapore

Individual Coursework 
Instructions to students:

Download stock prices for a company in any industry and for the market benchmark index in any country. Select monthly data (closing or adjusted prices) for 5 years or 60 periods. You can use any database to obtain the prices e.g., datastream, Yahoo Finance (click the Investing tab followed by the Historical Prices tab), etc. Calculate the percentage change in stock price and the percentage change in the market index. Generate the regression (dependent variable –Y is the stock, independent variableX is market change), make sure to check the intercept to zero. All you need is the
coefficient of X; this is the beta coefficient.
(40 marks)

After calculating beta, answer the following questions:

1. Explain the concept of total risk of a security and the two risk components:
systematic risk and unsystematic risk. Describe what happens to the total risk of a portfolio as the number of securities increases.

2. Suppose a company stock has a beta of 1.25. If the market falls by 25%, what might happen to the value of the stock?

3. Suppose a company stock has a beta of 0.82. What does that mean?

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