Finance homework

by | Mar 19, 2018 | Data Analysis

 

The file contains historical returns on a random sample of 50 companies. Some of the returns
may be NA, and you will need to deal with this prior to using the data.
Additionally, the file hw3_funddata.csv contains a selection of descriptive & fundamental data on those same
50 companies as of February 28, 2018. The descriptors in the file are:
• Company: The Company Ticker
• GICS Sector: The GICS Sector to which each company belongs
• MarketCapitalization: The Market Capitalization of each company
• Size: A classification of each company into one of potentially 5 market cap groups (Large, LargeMid,
Mid, SmallMid, and Small) – note that not all of the 5 groups may be represented in the data.
• AlphaForecast: The output of a Value + Momentum alpha forecasting model for these 50 companies.
Goals (all of these tasks must be completed in R):
• Clean the return data (deal with NA values)
• Find the weight vectors for the following portfolios as of Feb 28, 2018:
– Market Capitalization Weighted
– Equally Weighted
– Naive Risk Parity (Inverse Volatility Weighted)
– Minimum Variance (your portfolio should be long-only, and should have no more than 10% in any
one stock)
Compare each of the four portfolios in terms of:
• The predicted (annualized) volatility of the portfolio
• The forecasted alpha of the portfolio
• The weight in each of the GICS Sectors
• The weight in each of the size groups
Finally, optimize one final portfolio that uses the AlphaForecast for each stock as the expected return. You
are free to choose your own constraints and portfolio form (long only, long short, etc.) as well as the return
target. The goal is to achieve a high forecasted Alpha with reasonable risk and diversification. Explain why
you chose the method you did and discuss your results.
Notes:
• I recommend you install the package BurStFin and use the function var.shrink.eqcor() to calculate your
covariance matrix. For these excercises, please use all the data (full history).
• If you wish to include a beta constraint for your optimal portfolio (such as in a long-short optimal
portfolio with predicted market neutrality), you could download the historical S&P/TSX Composite
Index time series from Yahoo!Finance via quantmod, calculate the returns and line up data with your
sample of stock returns, and then use linear regression to estimate each stock’s beta vs. the index.

Sample Solution

Sample solution

Dante Alighieri played a critical role in the literature world through his poem Divine Comedy that was written in the 14th century. The poem contains Inferno, Purgatorio, and Paradiso. The Inferno is a description of the nine circles of torment that are found on the earth. It depicts the realms of the people that have gone against the spiritual values and who, instead, have chosen bestial appetite, violence, or fraud and malice. The nine circles of hell are limbo, lust, gluttony, greed and wrath. Others are heresy, violence, fraud, and treachery. The purpose of this paper is to examine the Dante’s Inferno in the perspective of its portrayal of God’s image and the justification of hell. 

In this epic poem, God is portrayed as a super being guilty of multiple weaknesses including being egotistic, unjust, and hypocritical. Dante, in this poem, depicts God as being more human than divine by challenging God’s omnipotence. Additionally, the manner in which Dante describes Hell is in full contradiction to the morals of God as written in the Bible. When god arranges Hell to flatter Himself, He commits egotism, a sin that is common among human beings (Cheney, 2016). The weakness is depicted in Limbo and on the Gate of Hell where, for instance, God sends those who do not worship Him to Hell. This implies that failure to worship Him is a sin.


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God is also depicted as lacking justice in His actions thus removing the godly image. The injustice is portrayed by the manner in which the sodomites and opportunists are treated. The opportunists are subjected to banner chasing in their lives after death followed by being stung by insects and maggots. They are known to having done neither good nor bad during their lifetimes and, therefore, justice could have demanded that they be granted a neutral punishment having lived a neutral life. The sodomites are also punished unfairly by God when Brunetto Lattini is condemned to hell despite being a good leader (Babor, T. F., McGovern, T., & Robaina, K. (2017). While he commited sodomy, God chooses to ignore all the other good deeds that Brunetto did.

Finally, God is also portrayed as being hypocritical in His actions, a sin that further diminishes His godliness and makes Him more human. A case in point is when God condemns the sin of egotism and goes ahead to commit it repeatedly. Proverbs 29:23 states that “arrogance will bring your downfall, but if you are humble, you will be respected.” When Slattery condemns Dante’s human state as being weak, doubtful, and limited, he is proving God’s hypocrisy because He is also human (Verdicchio, 2015). The actions of God in Hell as portrayed by Dante are inconsistent with the Biblical literature. Both Dante and God are prone to making mistakes, something common among human beings thus making God more human.

To wrap it up, Dante portrays God is more human since He commits the same sins that humans commit: egotism, hypocrisy, and injustice. Hell is justified as being a destination for victims of the mistakes committed by God. The Hell is presented as being a totally different place as compared to what is written about it in the Bible. As a result, reading through the text gives an image of God who is prone to the very mistakes common to humans thus ripping Him off His lofty status of divine and, instead, making Him a mere human. Whether or not Dante did it intentionally is subject to debate but one thing is clear in the poem: the misconstrued notion of God is revealed to future generations.

 

References

Babor, T. F., McGovern, T., & Robaina, K. (2017). Dante’s inferno: Seven deadly sins in scientific publishing and how to avoid them. Addiction Science: A Guide for the Perplexed, 267.

Cheney, L. D. G. (2016). Illustrations for Dante’s Inferno: A Comparative Study of Sandro Botticelli, Giovanni Stradano, and Federico Zuccaro. Cultural and Religious Studies, 4(8), 487.

Verdicchio, M. (2015). Irony and Desire in Dante’s” Inferno” 27. Italica, 285-297.