Financial Derivatives Final

8/12/2019 Financial Derivatives Final

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Executive Summary

Should we invest money in securities# The decision depends on many factors$ the

availaility of funds! a willingness to take risks! economic knowledge and experience or the

desire to give the money in trust stock market professionals. Some people invest money in

securities without making examination on these securities. %s a result these people lose

money. Smart investors make! on the other hand empirical research! provide some

assumptions! predictions in order to compare the intrinsic value of the securities with market

value. &nvestment decision making eventually addresses the issues of risk. So how to measure

risk and relation etween expected risk and return# &s 'apital %sset "ricing (odel holds in

)a*akhstan companies or contradict#

The paper provides rief information on the ackground and o+ective of the report.

There is some information aout companies ,-S' )a*akhtelecom! )a*munaiga* " and

/haikmunai LL"0! including its history! operations and usiness integration which are

descried in the literature review. &n (ethodology section! some asic theoretical aspects of

empirical research and valuation methods will e discussed. Findings and analysis content

shows our empirical tests and calculation process of valuation common shares and results. &n

final section of 'onclusion12ecommendation! according to our experiment of regression

analysis we interpret the regression output with conducting valid tests and ased on

comparison of intrinsic value with market value! we give recommendation on whether to

invest or not in securities of the company.

Table of Contents

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%cknowledgement333333333333333333333333333.4

xecutive Summary3333333333333333333333333335

I. Introduction.6!

a. 6ackground33333333333333333333333333.7

. 8+ective333333333333333333333333333.7

c. Scope333333333333333333333333333.......7

d. Limitation33333333333333333333333333....7

e. Significance of the issue333333333333333333333..9

II. "iterature #eview

-S' )a*akhtelecom33333333333333333333333..9:;

)a*munaiga* "333333333333333333333333..9:;

III. $et%odology..&'&(

I). *indings and Analysis..&(+&

). Conclusion and #ecommendation.+&

2eferences333333333333333333333333333..44

I. Introduction

,ackground

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6ased on the availale data and information of the companies )a*akhmys plc!

/H%&)(as E- covering Dividend

Discount (odel. (oreover! our research group focuses attention of the reader on calculation

of reBuired rate of return and risk for the companyAs stock through 'apital asset pricing model

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,'%"(0 in order to assess its attractiveness for the investor. %dditionally! the estimation of

2eturn on Buity through Du"ont analysis will e presented in order to find the expected

growth rate. %ll necessary data for assessing stocks of these three companies is retrieved

from financial reports placed on official wesite of the companies! )a*akhstan Stock

xchange and investfunds.k*. &nformation for 'apital asset pricing model ,'%"(0 and

estimation of such variales as eta and market return and figure of risk free rate was otained

from bcc-invest.kz! )%S wesite.

"imitation

8ne of the main limitations of this paper is an asence of necessary data which may result in

inaccuracy of estimations. (oreover! little information is availale to the general pulic

regarding closing price of stocks in national currency for )a*akhstan oil and gas sector

especially for /haikmunai. %ll these factors served as challenge for the research group to

make a careful analysis. The empirical evidence of the 'apital %sset "ricing model is

inadeBuate to negate the way that it is used in applications. The '%"(As empirical issues

might reveal theoretical failures! the conseBuence of many simplifying hypotheses. %lso

another reason of these prolems of '%"( is that it might e performing some valid tests of

the model. Caluation of common stock is very complex process. The stock reBuires a deeper

analysis compared to preferred stock or dets and without making some assumptions or

predictions! the estimating the intrinsic value for the common shares is arduous in comparison

with other securities. From this fact! our assessing of the security will e ased on the

assumption concerning the excepted growth rate of dividends.

II. "iterature review

KazMunaiGaz Exploration

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)a*(unai>a* xploration "roduction -S' is a susidiary of =ational 'ompany

)a*(unay>as! which elongs to =ational Wealth Fund Samruk:)a*ynaE. )(> " was

founded in (arch 45 y the merger of two hitherto +oint stock companies! " has production

ranches


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=' )(>! others are treasury shares,!I G0! free float ordinary shares ,I!IG0 and

preference shares ,4!G0.

Kazakhmys

)a*akhmys is considered to e the largest copper producer in )a*akhstan and one of

the leading copper producers all over the world. The shares of the company are traded in

London stock exchange! Hong )ong and %lmaty. Due to fully integrated companyAs

operations! )a*akhmys is not merely highly profitale company! ut also one of the copper

producers! which has the lowest costs and flexiility to serve many different customers. %s

the copper is one of the key metals! which can e found in every new apartment or office

lock! vehicle and electrical appliance! the demand for it is not falling! meaning the stale

supply for the corporation.

)a*akhmys operates I7 underground and open pit mines across )a*akhstan. &n 4I4!

company mined 9.K million tonnes of copper ore and processed it in

I concentrators. 'ompany also operates three coal:fired plants and heating plants that

generate the necessary level of power for copper production and market excess capacity for

commercial aims. )a*akhmys is also the largest domestic power provider in )a*akhstan with

4G of market share. &n addition to corporationAs captive power plants! company owns KG

of the countryAs largest power station ,kiastu* >2S:I0! which produced around

I5!7 >Wh of power in 4I4! IG aove the previous year.

a) Analysis of company performance

%ccording to the information provided on )a*akhstan Stock xchange! )a*akhmys

shareholders are represented y following entities$

'uprum Holding Limited M IK ;55 4K shares! 4K.;G

Fund of =ational Welfare ?Samruk:)a*yna@ -S' M K 97 9; shares! IIG

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Harper Finance Limited M 4; 97 ;I shares! K.KKG

'ommittee of State "roperty and "rivati*ation! (inistry of Finance of the 2epulic of

)a*akhstan M 47 K shares! IKG

>eneral pulic M 4 7 ;4 shares! 5.7G

Total numer of stated shares eBuals to 9K ! out of them KK 5I9 ;7I shares

are outstanding. (ore than 5G of )a*akhmys shares are in hands of the pulic! it means that

there is interest from the general pulic toward investment in eBuity of the company. Some

portion of people prefers investment in stocks which is more risky in comparison with

placement of deposits in second:tier anks.

(oreover! even though the key financial indicators! which are illustrated elow! show

that companyAs earnings are fluctuating indicating the riskiness of investment in companyAs

shares! still 4; polled investment analysts examining the )a*akhmys "L' advise to investors

to hold their position in the corporation. To e more precise! according to the analystsA

forecasts company is going to outperform the market in the nearest future ,Financial Times

LTD! 4I0.

Furthermore! local analysts of %syl &nvest give the advice for investors on shares of

)a*akhmys "L' to uy and hold securities of this company due to strong operating results

and prospects for a recovery in demand for copper from 'hina and )a*(unai>as. %nalysts

8

49 4 4; 4I 4II 4I4

6&TD% ,Nm0 4!7 4!K7 I!75 4!K 4!;4K I!;I4

"S ,N0 .4 4.49 I.I 4.9; 4. .;5

Free 'ash Flow ,Nm0 ;K 9IK K9; 9I 45 K

'ash 'ost of 'opper ,


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also draw the attention of investors on the strong characteristics of the issuer in terms of its

efficiency! profitaility and alance sheet indicators and lagging stock price indicators of the

company from the overall market ,"rodengi.k*! 4I40.

&n accordance with analysis of related literature! investment in shares of )a*akhmys has

following pros and cons respectively$

)a*akhmys is engaged in the cyclical usiness! conseBuently! its revenue and earnings

are heavily influenced y aggregate usiness activity. &n terms of stocks! this company

has high eta and its rate of return has greater changes than the overall market rate of

return. This is negative side of the industry! it adds risk! ut at the same time return

increases.

)a*akhmys has differentiation competitive strategy which is explained y the fact that

company is uniBue in the industry! thatAs why it is extremely important for the uyers

of their product. This factor contriutes to high revenues. There is also influence of the

cyclical usiness! ut nevertheless this factor may positively affect the dividend policy

in the future.

Zhaikmunai

/haikmunai! a Limited "artnership ,the ?"artnership@ or ?/haikmunai@0 was

estalished in )a*akhstan in I;;9 for the purpose of exploration and development of

'hinarevskoye oil and gas condensate field in the Western )a*akhstan 2egion. The

"artnership carries out its activities in accordance with the 'ontract for %dditional

xploration! "roduction and "roduction M Sharing of 'rude Hydrocarons in the

'hinarevskoye oil and gas condensate field dated in 8ctoer I! I;;9 in accordance with the

license (> =o. 4KD for the exploration and production of hydrocarons in 'hinarevskoye

oil and gas condensate field etween the State 'ommittee of &nvestments of the 2epulic of

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condensate from neighoring fields and "ursue the Buest for further reserves at low finding

costs. Focus on Delivering Shareholder Calue which includes "ursue a alanced approach to

investment in growth over the long:term! nsure strong operating cash flow generation

guaranteeing the expenditure programme and maintain a sound capital structure! a clear

financial policy and a regular dividend payout.

III. $et%odology

%n empirical research is a scientific study which is ased on facts. %ny scientific research

starts with the collection! classification and generali*ation of the facts. The concept of JfactJ

has the following ma+or meanings$

I0 Some fragment of reality! o+ective events! the results that ased on either to the

o+ective reality ,Jfacts of realityJ0! or to the realm of consciousness and knowledge

,Jfacts of consciousnessJ0Q

40 )nowledge of any event! phenomenon! which crediility is provedQ

0 %ny assumptions or suggestions that fixing empirical knowledge which received

during experiments and oservations.

The internal structure of empirical level is formed into two sulevels$

a0 Direct oservation and experiments which result are referred to these oservationsQ

0 6y means of cognitive procedures! transition from oservations to empirical

dependences and facts is carried out.

The activity:ased nature of empirical research at level of oservation is most

distinctly shown in situations when oservation is carried out during real experiment. 6y

tradition! the experiment is opposed to oservation which is out of experiment. LetRs note that

a core of empirical research is an experiment M test of the studied phenomena in controllale

and manageale conditions. The distinction etween an experimentation and oservation is

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that experimental conditions are controlled and managed! ut in oservation the processes are

given ased on the natural course of events. Without denying specifics of these two types of

cognitive activities! it is necessary to pay attention to their common generic features. First of

all we need to consider in more detail what the feature of experimental research as practical

activity is. xperimental work is a specific form of natural interaction! and interactive

fragments of the nature in the experiment always appear as o+ects with functionally allocated

properties.

Ca0ital Asset -ricing $odel

8ne of the main prolems that can e encountered when assessing the value of the

assets is to determine the relationship etween risk and return. The market pattern Jthe higher

the risk! the higher the rate of returnJ is not in dout. &n this case! each investor forms its own

forecasts of relatively marked parameters. However! the market tends to keep moving in the

direction of a certain eBuilirium valuations of risk and return on assets. &n a well:developed

market! new information is Buickly reflected in the market value of assets! so for these

conditions! there is a model that would adeBuately descrie the relationship etween risk and

return of assets. Such a model is developed in the mid 7s. y William Sharpe and -ohn

Lintern and was named the valuation of financial assets ,capital asset pricing model : '%"(0.

,6essonova! 490

'apital %sset "ricing (odel ,'%"(0 M a model for the economic evaluation of

shares! securities! derivatives and 1 or assets y relating risk and expected return. '%"( is

ased on the idea that investors demand additional expected return ,risk premium0 if they are

asked to take on additional risk. ,6essonova! 490

&n I;;! William Sharpe won the =oel "ri*e in the realm of economics for his

contriutions to the theory of pricing financial assets! that is so:called the 'apital %sset

"ricing (odel ,'%"(0. This is a single:factor model! the key factor is a risk.

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The main result of '%"( is the estalishment of the relationship etween return

and risk of the asset for the eBuilirium of the market. 8ne of the most important things is the

fact that in the making choice! the investor must take into account not the entire risk of the

security! ut the only systematic or non:diversifiale. This part of the risk of an asset is

closely linked to the overall market and Buantitatively represented y coefficient beta which

wasintroduced y William Sharpe in his one:factor model. ,6essonova! 490

'%"( can e determined in the following way$

iM

M

fM

fi

RRRR

+=

4 ,I0

Where =iR expected return on eBuilirium of the securityQ MR M return on the marketQ

4

M M the variance of the market or its riskQ fR M risk free rateQ iM M the covariance

etween the return of financial asset and return of the market.

"articular attention should e paid to coefficient model! which characteri*es the sensitivity

of the asset to market changes. The coefficient of '%"( is the ratio of$

4

M

iM

=

This ratio is used to measure the market risk and the relationship etween the return of

the financial asset and the return of the asset market.

We can rewrite the formula ,I0 y the following way$

0, fMfi RRRR += ,40

Hence! it clear that the '%"( is ased on following key variales$

2f:the risk:free rate of an investment

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2m : the overall stock market risk

: the stockRs eta

The capital asset pricing model '%"( : is single:factor model. &t is Buite widespread.

6ut like any other models! it has oth advantages and disadvantages. The main advantage is

that this model clearly descries the relationship etween return and risk. %s well as its main

drawack is that it is one factor and! therefore! cannot take into account all the factors

affecting the return. (S%ar0e, Alexander, ,ailey1 +''23

mpirical evidence was in favor of '%"( and the model ecame extremely famous in

the modern portfolio theory. Things were clear$ stocks with eta lower than I were considered

passive stocks and stocks with eta higher than I were considered aggressive and risky.

Depending on their appetite toward risk! investors would choose the stocks in their portfolio

according to the value of eta.

Though! some criticisms of '%"( appeared. 8ne very known critic in literature

elongs to Fama and French. &n I;;4! they discovered a negative relationship etween risk

and return. Since then! a very important Buestion is eing asked$ ?&s 6eta dead# @. %nd if the

answer is yes! what is the true nature and measure of risk# Fama and French came up with the

conclusion that a more realistic approach of the risk in the market is the multi:index models.

They argued that si*e of the firm and the ook to market value have a significant influence on

the performance of a stock.

4ividend 4iscount $odel 544$3

% lot of stock exchanges allow investors to invest in several securities including

stocks. To find necessary information aout stock! investors employ different types of

investment analyses including fundamental analysis. (any methods for calculating the

intrinsic value of a stock is used. &nvestors freBuently apply the dividend discount model to

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estimate the intrinsic value of a stock. 6ased on this model! they uy! hold or sell the stock.

,>8TTW%LD! 4I40

The dividend discount model provides a method of elaorating an explicit expected

return for the stock market. &t is a means of assessing ased on theory that a stock is eBual to

the discounted sum of all its future dividend payments. &n other words! the intrinsic value of a

stock is determined similar to the present value of future dividends. The stocks are valued

ased on the net present value of the future dividends. The predicting of future dividends is

sometimes rather prolematic. ,>8TTW%LD! 4I40.

Several methods of the dividend discount model are employed y the financial

analytics. The easiest method is that the value of a stock eBuals to the value for a perpetual

annuity with a constant level of payments.

" DivI1 ,k M g0

8ther methods are ased on increasing! stagnation or decreasing of dividends. The increasing

or decreasing of dividends can e in two ways$ linear or nonlinear. Financial analytics usually

consider possile increase rate of dividends with the aid of financial statements of companies

or historical information analysis. &n order to examine historical data! we should discover the

existence of such data. The possile growth rate of dividends relies on factors like dividend

policy! profit margin! return on eBuity and indetedness. ,>8TTW%LD! 4I40.

%ccording to 6lackwell! >riffiths and Winters ,490! stocks are divided y stocks

that pay dividends and stocks that do not pay dividends. %n investor who chooses the stock

which gives dividend looks forward to take part in two sets of future cash flows$ a stream of

future dividends and a sales price when the stock is sold.

6y assessing a dividend paying stock! we should make some hypothesis aout

dividend growth$ no growth in dividends! constant growth in dividends or non:constant

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growth in dividends. However! the hypothesis aout no growth in dividends could appear

insustantial. The speculation of constant dividends is appropriate for the peculiarities of

preferred stock! which contains a stated dividend of a fixed amount. %ll preferred stock

dividends have to e fully disursed efore any dividend on common stock can e disursed.

Supposition of constant growth in dividends is acceptale for the ig! stale! dividend:paying

companies! which are usually named as ?lue chip@ firms. % more general kind of assumption

is the non:constant growth in dividends which says that dividends are supposed to go down to

a rate of growth that is sustainale over the long run. There are often three:stage! four:stage

non:constant growth models in dividends are employed in practice. ,>8TTW%LD! 4I40.

The price of a share of stock is the present value of all expected future dividends

per share discounted at market capitali*ation rate$

Vj value of common stock +QDt dividend during period tQ k reBuired rate of return of

stockj or cost of eBuityQ t the holding period. The model was initially developed y

Williams ,I;0 and afterwards expanded y >ordon ,I;70 ,6realey U(yers ,4$ 75:

770.0

&n order to apply the aove eBuation! an investor has to predict all future

dividends. %nd additionally specific assumptions have to e made! these assumptions are

ased on dividend growth rates. Thus! the dividend per share at any time t can e expressed as

the dividend per share at time t:I times the growth rate of gt ,Sharpe! I;;;0$

Dt Dt:I O ,I V gt0

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We made the valuation of common stock ased on ?Two:stage Dividend

Discount (odel@. The model consists of two stages of growthQ an expected growth rate that

lasts ?t@ years and a steady state growth rate that lasts infinitely$

Where the intrinsic value of common stockQ

D Dividends per share at year 4I4Q

g expected growth rate that lasts t yearsQ

r cost of eBuity

"= "rice or Terminal value at the end of year =

%ccording to our assumption! the expected growth rate which we are going to

estimate y formula! " Ret#rn on e$#ity % Retention Ratio,will last for the next five years

and after five years it will e eBual to >D" growth rate of )a*akhstan which are KG until

eternity ,4I40 ,KG >D" growth rate is taken from the official wesite0

'ost of eBuity will e estimated according to the 'apital %sset "ricing (odel$

0, fMfi RRRR += ! in this eBuation risk free rate will e taken from )a*akhstan official

wesite which is called c:invest.k* that eBuals to the K.KGQ we will calculate the market

return ased on )%S &=D of monthly data starting from 4 till 4I4! as oth

)a*(unai>as " and -S' )a*akhtelecom are listed in this indexQ the will e estimated

ased on the historical stock prices of two companies also referring to the monthly data. From

historical prices we will otain annual returns and use formula for finding the $

& " 'ovariance (' *azak+telecom, *A D/) 0 Variance (*A D/)

& " 'ovariance (*azM#nai1as , *A D/) 0 Variance (*A D/).

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%s mentioned aove! the formula for calculating the expected growth rate that we

are going to use$

! " Ret#rn on e$#ity % Retention Ratio

For estimating 2eturn on eBuity we will employ Du"ont analysis and Financial Statement of

the two companies for 4I4$

R2 " rofit Mar!in (rofit0ales) % 3otal Asset 3#rnover (ales0Assets) % $#ity M#ltiplier

(Assets0$#ity)

2etention ratio will e estimated y the following formula$

Retention Ratio " (4 5 D for 67460 (or et ncome) for 6746) " (4 5 ay2#t ratio)

%fter that we will compute the present value of all expected future dividends per

share discounted at the cost of eBuity. The terminal value will e computed after five years y

this formula$

"= xpected dividends per share at end of year =1,'ost of eBuity M >D" steady state

growth rate0

I). *indings and Analysis

The data that examined here are the monthly returns for the three companies. The data

cover for )a*munaiga* and )a*akhmys Decemer 49 through Decemer 4I4 and for

/haikmunai (arch 4 through Decemer 4I4. The market return is measured for

three companies using the London Stock xchange. Here are the values$

Kazakhmys LSE

Date Close Return Date Close Return

31-Dec-2012 778 0.090399 31-Dec-2012 1088 0.113043

30-Nov-2012 713.5 0.006347 30-Nov-2012 977.5 0.00205

31-Oct-2012 709 0.02327 31-Oct-2012 975.5 0.034464

28-Sep-2012 692.5 0.167791 28-Sep-2012 943 !0.0503

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31-Aug-2012 593 !0.157 31-Aug-2012 993.5 0.024755

31-Jul-2012 705 !0.0227 31-Jul-2012 969.5 !0.03436

29-Jun-2012 721.5 0.04962 29-Jun-2012 1004 0.004

31-May-2012 665 !0.22764 31-May-2012 1000 !0.00

30-Ap-2012 861 !0.05176 30-Ap-2012 1088 0.052224

30-Ma-2012 908 !0.1124 30-Ma-2012 1034 0.146341

29-!e"-2012 1109 !0.02377 29-!e"-2012 902 0.03672

31-Jan-2012 1136 0.22545 31-Jan-2012 870 0.09434

30-Dec-2011 927 0.002162 30-Dec-2011 795 !0.07612

30-Nov-2011 925 !0.0027 30-Nov-2011 860.5 !0.0439

31-Oct-2011 927.5 0.169609 31-Oct-2011 900 0.104294

30-Sep-2011 793 !0.27314 30-Sep-2011 815 !0.11461

31-Aug-2011 1091 !0.19065 31-Aug-2011 920.5 !0.07673

29-Jul-2011 1348 !0.02319 29-Jul-2011 997 !0.06032

30-Jun-2011 1380 0.05022 30-Jun-2011 1061 0.02101

31-May-2011 1314 !0.04714 31-May-2011 980.5 0.125072

28-Ap-2011 1379 !0.01076 28-Ap-2011 871.5 0.04647

31-Ma-2011 1394 !0.03463 31-Ma-2011 832.5 !0.07528-!e"-2011 1444 !0.04117 28-!e"-2011 900 0.0633

31-Jan-2011 1506 !0.06691 31-Jan-2011 846 0.009547

31-Dec-2010 1614 0.164502 31-Dec-2010 838 0.10412

30-Nov-2010 1386 0.053191 30-Nov-2010 758.5 0.033379

29-Oct-2010 1316 !0.09366 29-Oct-2010 734 0.07727

30-Sep-2010 1452 0.256055 30-Sep-2010 681 0.031037

31-Aug-2010 1156 !0.04934 31-Aug-2010 660.5 0.02066

30-Jul-2010 1216 0.22334 30-Jul-2010 647 0.1411

30-Jun-2010 994 !0.1611 30-Jun-2010 563.5 !0.12227

31-May-2010 1185 !0.1559 31-May-2010 642 !0.06277

30-Ap-2010 1404 !0.0055 30-Ap-2010 685 !0.0359

31-Ma-2010 1527 0.13702 31-Ma-2010 710.5 0.0642126-!e"-2010 1341 0.10002 26-!e"-2010 665 0.036633

29-Jan-2010 1219 !0.020 29-Jan-2010 641.5 !0.10655

31-Dec-2009 1328 0.07704 31-Dec-2009 718 !0.0455

30-Nov-2009 1233 0.132231 30-Nov-2009 752.5 !0.11575

30-Oct-2009 1089 0.013966 30-Oct-2009 851 !0.0054

30-Sep-2009 1074 0.06495 30-Sep-2009 856 0.062694

31-Aug-2009 988.5 0.154116 31-Aug-2009 805.5 0.13132

31-Jul-2009 856.5 0.359524 31-Jul-2009 712 0.013523

30-Jun-2009 630 !0.0762 30-Jun-2009 702.5 0.0154

29-May-2009 690.5 0.290654 29-May-2009 689.5 !0.07944

30-Ap-2009 535 0.442049 30-Ap-2009 749 0.324492

31-Ma-2009 371 0.4173 31-Ma-2009 565.5 0.302245

27-!e"-2009 261.5 0.16715 27-!e"-2009 434.25 !0.09766

30-Jan-2009 223.75 !0.03139 30-Jan-2009 481.25 !0.05637

31-Dec-2008 231 !0.1106 31-Dec-2008 510 !0.16256

28-Nov-2008 259.75 !0.09019 28-Nov-2008 609 0.090421

31-Oct-2008 285.5 !0.50776 31-Oct-2008 558.5 !0.3524

30-Sep-2008 580 !0.5510 30-Sep-2008 863 0.0272

29-Aug-2008 1292 !0.1309 29-Aug-2008 793 !0.04573

31-Jul-2008 1499 !0.0542 31-Jul-2008 831 0.06535

30-Jun-2008 1592 !0.05799 30-Jun-2008 780 !0.24051

30-May-2008 1690 0.0626 30-May-2008 1027 !0.04643

30-Ap-2008 1582 !0.00939 30-Ap-2008 1077 !0.1044

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31-Ma-2008 1597 0.0329 31-Ma-2008 1208 !0.11111

29-!e"-2008 1546 0.27242 29-!e"-2008 1359 !0.19633

31-Jan-2008 1215 !0.11379 31-Jan-2008 1691 !0.14553

31-Dec-2007 1371 31-Dec-2007 1979

Kaz"una#$as LSE


31-Dec-2012 18 !0.03743 31-Dec-2012 1088 0.113043

30-Nov-2012 18.7 0.053521 30-Nov-2012 977.5 0.00205

31-Oct-2012 17.75 !0.03794 31-Oct-2012 975.5 0.034464

28-Sep-2012 18.45 0.025 28-Sep-2012 943 -0.05083

31-Aug-2012 18 !0.00662 31-Aug-2012 993.5 0.024755

31-Jul-2012 18.12 0.07219 31-Jul-2012 969.5 -0.03436

29-Jun-2012 16.9 !0.09042 29-Jun-2012 1004 0.004

31-May-2012 18.58 !0.071 31-May-2012 1000 -0.08088

30-Ap-2012 20 !0.0131 30-Ap-2012 1088 0.05222430-Ma-2012 20.28 0.132961 30-Ma-2012 1034 0.146341

29-!e"-2012 17.9 0.132911 29-!e"-2012 902 0.036782

31-Jan-2012 15.8 0.05656 31-Jan-2012 870 0.09434

30-Dec-2011 14.95 !0.07143 30-Dec-2011 795 -0.07612

30-Nov-2011 16.1 !0.0513 30-Nov-2011 860.5 -0.04389

31-Oct-2011 16.98 0.15254 31-Oct-2011 900 0.104294

30-Sep-2011 14.66 !0.1351 30-Sep-2011 815 -0.11461

31-Aug-2011 16.95 !0.037 31-Aug-2011 920.5 -0.07673

29-Jul-2011 18.5 !0.07035 29-Jul-2011 997 -0.06032

30-Jun-2011 19.9 !0.07657 30-Jun-2011 1061 0.082101

31-May-2011 21.55 !0.0457 31-May-2011 980.5 0.125072

28-Ap-2011 22.65 !0.02455 28-Ap-2011 871.5 0.04684728-Ma-2011 23.22 0.009565 31-Ma-2011 832.5 -0.075

28-!e"-2011 23 0.069767 28-!e"-2011 900 0.06383

31-Jan-2011 21.5 0.04216 31-Jan-2011 846 0.009547

31-Dec-2010 19.83 0.03212 31-Dec-2010 838 0.104812

30-Nov-2010 19.2 0.116279 30-Nov-2010 758.5 0.033379

29-Oct-2010 17.2 !0.0266 29-Oct-2010 734 0.077827

30-Sep-2010 17.67 0.001701 30-Sep-2010 681 0.031037

31-Aug-2010 17.64 !0.0916 31-Aug-2010 660.5 0.020866

30-Jul-2010 19.56 0.051613 30-Jul-2010 647 0.148181

30-Jun-2010 18.6 !0.1327 30-Jun-2010 563.5 -0.12227

31-May-2010 21.45 !0.1205 31-May-2010 642 -0.06277

30-Ap-2010 24.6 !0.0024 30-Ap-2010 685 -0.03589

31-Ma-2010 24.67 0.021955 31-Ma-2010 710.5 0.068421

26-!e"-2010 24.14 !0.04961 26-!e"-2010 665 0.036633

29-Jan-2010 25.4 0.0200 29-Jan-2010 641.5 -0.10655

31-Dec-2009 24.9 0.033195 31-Dec-2009 718 -0.04585

30-Nov-2009 24.1 0.019027 30-Nov-2009 752.5 -0.11575

30-Oct-2009 23.65 0.056747 30-Oct-2009 851 -0.00584

30-Sep-2009 22.38 0.017273 30-Sep-2009 856 0.062694

31-Aug-2009 22 0.0202 31-Aug-2009 805.5 0.13132

31-Jul-2009 21.55 0.134211 31-Jul-2009 712 0.013523

30-Jun-2009 19 !0.13597 30-Jun-2009 702.5 0.018854

29-May-2009 21.99 0.23176 29-May-2009 689.5 -0.07944

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30-Ap-2009 17.76 0.191946 30-Ap-2009 749 0.324492

31-Ma-2009 14.9 0.214344 31-Ma-2009 565.5 0.302245

27-!e"-2009 12.27 !0.0336 27-!e"-2009 434.25 -0.09766

30-Jan-2009 12.7 0.007937 30-Jan-2009 481.25 -0.05637

31-Dec-2008 12.6 !0.0604 31-Dec-2008 510 -0.16256

28-Nov-2008 13.41 !0.04214 28-Nov-2008 609 0.090421

31-Oct-2008 14 !0.09677 31-Oct-2008 558.5 -0.35284

30-Sep-2008 15.5 !0.33045 30-Sep-2008 863 0.088272

29-Aug-2008 23.15 !0.09216 29-Aug-2008 793 -0.04573

31-Jul-2008 25.5 !0.15619 31-Jul-2008 831 0.065385

17-Jun-2008 30.22 !0.0672 30-Jun-2008 780 -0.24051

30-May-2008 32.45 0.103741 30-May-2008 1027 -0.04643

30-Ap-2008 29.4 0.173653 30-Ap-2008 1077 -0.10844

31-Ma-2008 25.05 0.01417 31-Ma-2008 1208 -0.11111

29-!e"-2008 24.7 !0.05364 29-!e"-2008 1359 -0.19633

31-Jan-2008 26.1 !0.1506 31-Jan-2008 1691 -0.14553

31-Dec-2007 31 31-Dec-2007 1979

%ha#kmuna# LSE


31-Dec-2012 10.7 -0.02727 31-Dec-2012 1088 0.113043

30-Nov-2012 11 0.028037 30-Nov-2012 977.5 0.00205

31-Oct-2012 10.7 0.04902 31-Oct-2012 975.5 0.034464

28-Sep-2012 10.2 0.051546 28-Sep-2012 943 -0.05083

31-Aug-2012 9.7 0.175758 31-Aug-2012 993.5 0.024755

31-Jul-2012 8.25 -0.02941 31-Jul-2012 969.5 -0.03436

29-Jun-2012 8.5 -0.12821 29-Jun-2012 1004 0.004

31-May-2012 9.75 -0.09302 31-May-2012 1000 -0.08088

30-Ap-2012 10.75 -0.03932 30-Ap-2012 1088 0.052224

30-Ma-2012 11.19 -0.01842 30-Ma-2012 1034 0.146341

29-!e"-2012 11.4 0.055556 29-!e"-2012 902 0.036782

31-Jan-2012 10.8 0.112255 31-Jan-2012 870 0.09434

30-Dec-2011 9.71 0.078889 30-Dec-2011 795 -0.07612

30-Nov-2011 9 0.086957 30-Nov-2011 860.5 -0.04389

31-Oct-2011 8.28 0.118919 31-Oct-2011 900 0.104294

30-Sep-2011 7.4 -0.09756 30-Sep-2011 815 -0.11461

31-Aug-2011 8.2 -0.17172 31-Aug-2011 920.5 -0.07673

29-Jul-2011 9.9 -0.00503 29-Jul-2011 997 -0.0603230-Jun-2011 9.95 -0.09545 30-Jun-2011 1061 0.082101

31-May-2011 11 -0.07329 31-May-2011 980.5 0.125072

28-Ap-2011 11.87 -0.04274 28-Ap-2011 871.5 0.046847

31-Ma-2011 12.4 -0.04542 31-Ma-2011 832.5 -0.075

28-!e"-2011 12.99 0.05868 28-!e"-2011 900 0.06383

31-Jan-2011 12.27 0.0225 31-Jan-2011 846 0.009547

31-Dec-2010 12 0.043478 31-Dec-2010 838 0.104812

30-Nov-2010 11.5 0.084906 30-Nov-2010 758.5 0.033379

29-Oct-2010 10.6 0.325 29-Oct-2010 734 0.077827

30-Sep-2010 8 0.142857 30-Sep-2010 681 0.031037

31-Aug-2010 7 -0.05405 31-Aug-2010 660.5 0.020866

30-Jul-2010 7.4 0 30-Jul-2010 647 0.148181

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30-Jun-2010 7.4 -0.06329 30-Jun-2010 563.5 -0.12227

31-May-2010 7.9 -0.07494 31-May-2010 642 -0.06277

30-Ap-2010 8.54 -0.024 30-Ap-2010 685 -0.03589

31-Ma-2010 8.75 0.11465 31-Ma-2010 710.5 0.068421

26-!e"-2010 7.85 -0.04848 26-!e"-2010 665 0.036633

29-Jan-2010 8.25 -0.02941 29-Jan-2010 641.5 -0.10655

31-Dec-2009 8.5 0.307692 31-Dec-2009 718 -0.04585

30-Nov-2009 6.5 0.382979 30-Nov-2009 752.5 -0.11575

30-Oct-2009 4.7 -0.01053 30-Oct-2009 851 -0.00584

30-Sep-2009 4.75 -0.05 30-Sep-2009 856 0.062694

31-Aug-2009 5 0.136364 31-Aug-2009 805.5 0.13132

31-Jul-2009 4.4 -0.2 31-Jul-2009 712 0.013523

30-Jun-2009 5.5 0.222222 30-Jun-2009 702.5 0.018854

29-May-2009 4.5 0.084337 29-May-2009 689.5 -0.07944

30-Ap-2009 4.15 1.075 30-Ap-2009 749 0.324492

31-Ma-2009 2 -0.14894 31-Ma-2009 565.5 0.302245

27-!e"-2009 2.35 0.175 27-!e"-2009 434.25 -0.09766

30-Jan-2009 2 -0.27273 30-Jan-2009 481.25 -0.0563731-Dec-2008 2.75 -0.40605 31-Dec-2008 510 -0.16256

28-Nov-2008 4.63 -0.02526 28-Nov-2008 609 0.090421

31-Oct-2008 4.75 -0.40625 31-Oct-2008 558.5 -0.35284

30-Sep-2008 8 -0.41606 30-Sep-2008 863 0.088272

29-Aug-2008 13.7 -0.05517 29-Aug-2008 793 -0.04573

30-Jul-2008 14.5 -0.08805 31-Jul-2008 831 0.065385

30-Jun-2008 15.9 0.05298 30-Jun-2008 780 -0.24051

30-May-2008 15.1 0.263598 30-May-2008 1027 -0.04643

30-Ap-2008 11.95 0.138095 30-Ap-2008 1077 -0.10844

31-Ma-2008 10.5 0.009615 31-Ma-2008 1208 -0.11111

28-Ma-2008 10.4 29-!e"-2008 1359

Here are the results of a regression fit$

a7muniaga7

Depen$ent %a&a"le' (A)M*N

Met+o$' ,eat Suae

Date' 12/11/13 &e' 04'12

Saple' 2008M01 2012M12

nclu$e$ o"evat&on' 60

(A)M*N12,SA

oe&c&ent St$. :o t-Stat&t&c ;o".

1 -0.002705 0.012604 -0.214621 0.8308

2 0.304331 0.110258 2.760171 0.0077

e &no c&te&on -1.783350

Su uae$ e&$ 0.552363 Sc+?a@ c&te&on -1.713538

,og l&>el&+oo$ 55.50049 annan-Bu&nn c&te. -1.756043

!-tat&t&c 7.618541 Du"&n-Caton tat 1.710942

;o"!-tat&t&c 0.007720

22


23/26

a7ak%mys

Depen$ent %a&a"le' (A)MS

Met+o$' ,eat Suae

Date' 12/11/13 &e' 04'16Saple' 2008M01 2012M12

nclu$e$ o"evat&on' 60

(A)MS12,SA


1 0.011164 0.021565 0.517678 0.6067

2 0.683307 0.188654 3.622002 0.0006

e &no c&te&on -0.709163

Su uae$ e&$ 1.617105 Sc+?a@ c&te&on -0.639352,og l&>el&+oo$ 23.27490 annan-Bu&nn c&te. -0.681856


;o"!-tat&t&c 0.000616

8%aikmunai

Depen$ent %a&a"le' )A(

Met+o$' ,eat Suae

Date' 12/11/13 &e' 04'21

Saple a$=ute$' 2008M01 2012M10

nclu$e$ o"evat&on' 58 ate a$=utent

)A(12,SA2


1 0.018285 0.026377 0.693218 0.4910

2 0.644823 0.236041 2.731821 0.0084

e &no c&te&on -0.338854

Su uae$ e&$ 2.258604 Sc+?a@ c&te&on -0.267804

,og l&>el&+oo$ 11.82676 annan-Bu&nn c&te. -0.311178


;o"!-tat&t&c 0.008409

23


24/26

The estimate of three etas is$ '.9':5a7munaiga731 '.6295a7ak%mys31

'.6::58%aikmunai3. %s we see stocks of a7akmys is doule riskierthana7munaiga71

ut a little it riskier than 8%aikmunai.However all three companiesA stocks have less price

volatility than the market and are less risky.

&f we conduct t-test for the hypothesis $

87 9 & " 7

849 & : 7

a7munaiga7;

*azm#nai!az ret#rn " -7.776;7< = 7.>7?>>4 Market Ret#rn R6" 7.44@47>

se (7.746@7?) (7.44767) (7.77;;) t "&0se(&) "7.>7?>>407.4476>7;Market Ret#rn R6" 7.4??@?

se (7.764


25/26


26/26

References

>ottwald! 2. ,4I40. 38 E 2F 38 DVDD D'2E3 M2DG 32

MAER 32'* R' V2GA3G3H. -ournal of interdisciplinary research

6essonova 8. S. E 2F 'A3AG A3 R'1 M2DG ('AM) F2R

/'3D R3ER F2R'A31 2 /AMG 2F

3G'2MME'A32 '2MA 32'*

>u+arati D.Iasic conometrics

Fama! .F. U French! ).2. ,450. The 'apital %sset "ricing (odel$ theory and

evidence.o#rnal of conomic erspectives 4,0.

Farrell! -. ,I;K0. The dividend discount model$ a primer.Financial Analysts o#rnal

?4,70.

Hillier! D.! 2oss!S.! Westerfield! 2.! -affe! -. U -ordan! 6. ,4I0. 'orporate Finance.

raw:Hill

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Financial Derivatives Final