Problem Description: Distributed Ledger Technology (DLT) has captured the imagination of…
Distributed Ledger Technology (DLT) has captured the imagination of entrepreneurs and policy makers. According to some, Blockchain (a feature of DLTs) has the potential to revolutionise transactions protecting the integrity of ownership (property rights (http://www.econlib.org/library/Enc/PropertyRights.html)). Further, pilot transactions conducted by various banks has demonstrated tangible improvements in market efficiency – that is large (and at times complex) transactions have been sufficiently quicker and simpler using DLT.
These advantages suggest there could be tremendous opportunities for individuals to benefit from this new technology by investing in companies that are successfully embracing it. One such company is DigitalX( https://www.digitalx.com/). Your task is to evaluate recent share price performance of this company and based on this evidence whether individuals should invest in this company.
There are three parts to this assignment, each are described in detail:
Locate the data file (Assignment Bus Stats.xls) on CANVAS.
1. Using the most appropriate type of graph present weekly closing price and provide a general description. Hint: What are the main features of this graph, is there a trend? Are their changes in the trend? [Topic 1]
2. Calculate the weekly return and construct a histogram. Does the data appear normally distributed? Is there evidence of outliers? [Topics 1, 2 and 5] Hint: the formula for a return is (Current Price –Previous price))/(Previous price) multiplied by 100
3. Calculate and interpret the three aspects of Descriptive Analysis, Location, Shape and Spread, for weekly return. [Topic 2]
4. What is the empirical probability of a loss? [Topic 3]
5. Repeat the same steps (steps 1-4 above) for the ASX index.
(1 + 1 + 2 + 1 + 3 = 8 marks)
Financial Analysts will often try to model returns on a singular company against a market index – this is sometimes referred to as the market model. Your task is to replicate this model by regressing the returns of DigitalX (Y variable) against the returns on the ASX200 index (X variable) as provided in the data file.
1. Critically assess the veracity of this model by examining the goodness of fit, coefficients (together with the 95% confidence interval) and residuals. [Topics 7 & 9]
2. Identify two factors that you believe could improve the regression model. Remember to explain why you think these factors are important, where you might source them from and whether their influence is likely to be positive or negative. [Topic 10]
(3 + 3 = 6 marks)
1. Write a ministerial brief of no more than 200 words containing no more than three graphs on whether you can confidently recommend investing in DigitalX. Hint: Follow the template provided (Template 2 How to write a ministerial brief) and draw on the evidence you have gathered from Parts A and B.