Instructions:
In this assignment, follow the steps below and simulate the future price for a stock.
1. Pick one stock you are interested in to analyze.
2. Select a reasonable historical period based on which to simulate the stock’s future price (i.e. past 6 months, past 12 months, past 18 months, etc). Collect historical price data from Yahoo! Finance for the stock selected.
3. In Excel, calculate the historical daily return. State in your report why you believe the historical period selected for your analysis is one that is reasonable to be a basis for your future simulation. Double-check the histogram of the historical daily returns you calculated and make sure they are following a normal distribution.
4. In Excel, use Monte Carlo simulation to simulate the stock’s daily price in the next one month (20 trading days). Create a chart to show the simulated stock price.
5. Repeat the simulation 10,000 times. Report the statistical summary (mean, average, median, etc.) of the simulated price one month later
.6. Write a brief report in a Word file and briefly describe the following items:
– What you have done in the previous steps?
– Give a final estimation of what the approximate stock price after one month will be?
– Compared with the most recent stock price in your data downloaded, how are you going to invest in this stock in the next one month, long or short?
– What will be the possible holding period return in this month based on your investment strategy?As the simulation result is changing all the time, you can take a screenshot of one simulation result generated from Excel and answer the questions above based on it.
7. Submit both Excel file (with your detailed modeling) and Word file (with your report)
check the attached file for all the requirements
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