Risk management models are used by business managers and investors in different stages in different business decisions to understand and manage risk.  Describe the benefits for investors calculating returns, volatility and descriptive statistics in modeling, analyzing and managing risk.

(a)Compute the returns (RT) of the following Australian share market indices
(b)Plot each weekly returns (RT) over the time period. Compare and comment on the volatility and volatility clustering  of the returns
(c)Estimate summary descriptive statistics (average, mode, median, standard deviation, skewness and kurtosis) of the return numbers you calculated using Excel/SPSS and geometric mean,. cumulative wealth Index, coefficient of variation (CV) and the probability  of obtaining negative return
(d)Compare risk and return of these investments using the appropriate plot.
(e)Check whether the given data (return) set is normally distributed or not and explain why stock returns in-general have leptokurtic distributions. (Use Excel/SPSS)
(f)Explain why skewness in return is important to investors and what causes the skewness in the asset return?
Task 3. Variance, Covariance Matrix and EMH Testing-Total marks 40

(a)Explain the importance of correlation and covariance coefficients in managing and modeling risk among different asset return.
(b)Estimate correlation matrix for asset returns.  Comment on the correlation between the stock indices refer to asset selection for portfolio
(c)Estimate the variance and covariance matrix for asset returns.  Comment on these covariance coefficients
(d)Estimate the portfolio return and standard deviations of the following three portfolios and comment on each portfolio performance also using an appropriate plot.