Bloomberg Exercises
If you are an instructor, please email Charlie charliexcai@gmail.com to get the suggested answers to these exercises.
Chapter 1. Introduction – Experts and Evidence
Chapter 2. Warren Buffett – The Greatest Investor?
Chapter 3. Philip Fisher – Growth Investor
The case for small cap investment
Chapter 4. David Dreman – The Master Contrarian?
Chapter 5. Harry Markowitz – The Father of Portfolio Theory
Chapter 6. Behavioural Finance – Some Useful Insights
Chapter 7. Technical Analysis
Chapter 8. Quants and Alternative Investments
Appendix I. Introduction to BLOOMBERG PROFESSIONAL®
Appendix II. Methods of Valuation
About the Companion Website
Index
For Chapter 3: The case for small cap investment
Objective: Study the case for small-cap investment using the UK market as an example
Compare the return and volatility of the two major indexes in the UK market: FTSE100 {UKX}, FTSE Small Cap {SMX Index} using the functions comparative return {COMP} and graph volatility {GV}. Note that for SMX there is no implied volatility so we only study 30d historical volatility. Use the last 5 years as the time frame of your study. What do you conclude from your analysis?
How can you construct a long-short strategy with these two indexes to take advantage of what you find? Use the Spread Analysis {HS} to demonstrate your strategy return.
Extensions:
Identify ETFs that can be used for your strategy and redo the analyses using those securities.
Check if your conclusion is similar if you only use the other 5 year data right before the beginning of the above main analysis (e.g., if you did your main analysis between Jan 2017- Dec 2021, then try studying Jan 2012- Dec2016).
Is this size effect consistent in different markets? Pick another market of your choice and redo the analysis.