FNCE3001: Introduction to Financial

Instruments and Markets – Research Project

Research Project

Introduction to Financial Instruments and Markets

This project is worth 70 marks.

· Marks are allocated for presentation of assignment, analysis and written report.

· Any assumptions that you rely upon must be clearly stated in the written report. Do not just state something without developing an argument or discussion.

Total Marks: 70

Formatting requirements:

· Maximum of 10 sides of A4 (excluding tables, diagrams, references and appendices).

· Word limit 4000 Max (excluding references and appendices).

· Font size ≥ 11; Font face is Times New Roman.

· Line-spacing 1.5 and minimum margin 2.54 cm in all 4 sides.

· Submission is via Turnitin

· Ensure you attach the assessment cover sheet as a front page to your assignment and the signed group cover form.

Learning outcomes associated with assignment:

This is a group research assignment (a group of 3-4 members)

You are expected to undertake research, analysis, take responsibility for your submission. Questions are linked – they are broken down into marks to assist you in structuring your answers and research.

1. Compare the types of equity securities that companies can use to raise equity capital and understand how share prices are determined.

2. Interpret international financial economic theories in relation to financial instruments and markets, including the effect on calculation of financial instrument prices

3. Ethics

Group Project Cover Sheet – Integrated Financial Instruments & Markets

Contribution Key: (1) Did less than fair share, (2) Did fair share, (3) Did more than fair share. Recall that there is a 50% penalty if you did not contribute your fair share to completion of the project. Please use the comments section to note any comments you have on the way in which your team worked on the project, the structure of the project, and possible improvements for the project in future sessions.

Group/Individual Project Total 70 marks

Formatting [Total: 5 marks]

Five marks are allocated to the presentation of your assignment. For example, to receive full marks for your assignment you must adhere to the formatting requirements, provide well- presented and labelled charts (if appropriate) and include references.

Question 1 [Total: 26 Marks]

CoStar Group (NASDAQ:CSGP) is a stock listed on Nasdaq.

You will consider the time-period and daily share price of the company for the period March 1, 2024 until February 28, 2025.

Provide a bar or candlestick chart (or multiple charts) of the daily share price for the time period above. Identify at least three days, where news stories, events or issues related to the company have majorly impacted the share price. Evaluate and discuss the magnitude and direction of the price changes (opening to close) of the instances you have identified. Your answer should consider why the news/event/story impacted the share price in the manner that it did, as well as other possible considerations besides the identified news articles that you believe would have impacted the share price. (15 marks)

Next, use the chart created above and a technical analysis tool from learning module 4 to predict future stock price movements. What does your analysis indicate if you were an existing investor? (would you buy, sell or hold?). What does the usage of technical analysis mean for the theory of market efficiency? (11 marks)

Question 2 - [Total: 30 Marks]

You have been considering investing in CoStar Group (NASDAQ:CSGP). You have decided to do a more thorough analysis of it.

i) Provide an industry and company analysis for CSGP (see supplementary resources on Blackboard). You should consider the factors which influence CSGP's share price (e.g. key competitors, peers, industry influences, company business, key financial ratios). (15 marks)

ii) Identify and discuss at least one benchmark that you have chosen to compare CSGP against. What considerations did you make in your choice of benchmark? Chart your choice of benchmark against CSGP's share price over the same period in Question 1 and compare the two graphically. What, in your opinion has been the main driver for the share price movement? (10 marks)

iii) Valuation multiples are often used to compare companies quickly. Identify an appropriate valuation multiple/ratio and evaluate if CSGP is over, under or fairly valued. Explain the reasoning behind your choice of multiple that you utilised for your analysis. Are there any limitations of utilising multiples that you might need to consider? (5 marks)

Question 3 – Ethics [Total 9 Marks]

Please treat each part as an independent question.

a) Ron Chen, a CFA credential holder working as a portfolio manager at Park Investments, is considering taking on the management of his family members' investment portfolios and earning a portion of the profits generated. He has communicated his intentions for this external work arrangement in writing to his employer. After waiting for two weeks without any feedback from his employer, Ron begins to oversee his family's portfolios. Did Ron's actions contravene any of the Standards of Professional Conduct of the CFA Institute? Why? (3 marks)

b) Teresa Thomas, who holds the designation of Chartered Financial Analyst, works as an investment officer within a trust department of a bank. Her clientele includes notables from the entertainment industry and political figures, one of whom is a prominent local politician. She has been approached by the headquarters of the politician's party with a mandate to reveal the politician’s stock portfolio, citing legal requirements for such disclosure. What should Teresa do? Why?        (3 marks)

c) Lisa Smith, a Chartered Financial Analyst, happened to overhear a conversation at a bar in the financial district after her workday. Several employees from a rival firm were discussing their plan to manipulate the price of a thinly traded micro cap stock in the upcoming days. Lisa's clients held substantial positions in this stock. When she got to her office the following day, she promptly sold all of these positions. Having assessed that the stock was appropriate for her clients’ portfolios at its prior higher price, she decided to repurchase the stock for her clients at the reduced price later that week, restoring their original investment level. Has Lisa breached any Conduct standards set by the CFA Institute? Why?  (3 Marks)