Background

You are employed as a trainee investment analyst with a large fund management group. As part of
your training you have been seconded to the manager of an investment trust.
The manager is thinking of raising the proportion of unit trust funds which are allocated to either
the RETAIL or the INDUSTRIAL sector, has obtained some data from a random sample of the
companies in these sectors, and has asked you to provide answers to several questions based on
this data.

Information Required
The unit trust manager knows very little about either the RETAIL or INDUSTRIAL sectors and
has asked for some specific information to help build a picture of the sector.
The data collected are listed in The Data section of this document.
1. Calculate the average size of a company within the sectors using three different size variables
and also discuss which of the 'average' measures (mean, median etc) might be appropriate. Give
reasons. Also, are there any differences between sectors?
2. Is there any evidence of an increase in share returns on average between 2013 and 2014 for
companies in these sectors? Is there a difference between the sectors?
3. There have been suggestions that in recent years large companies have performed better
than small ones. Is there any evidence that large companies produce better returns than small
companies in either sector in 2013 and 2014?
Using the information so far, or anything else you think appropriate, you must decide which
sector will provide the best investment opportunities. Give full details of your decision. Having
decided which sector provides the best investment opportunities, investigate the following
investment strategies within this sector.

The Data
The data has been stored in three files..
RETAIL* data on all companies in the RETAIL sector
INDUST* data on all companies in the INDUSTRIAL sector
NewCo* monthly returns for 120 consecutive months for 1 particular
company from the sector ('NewCo') and for the Market Index and the Sector Index and other
measures for both the company and the sector.
.
The data included in the two
Variable Name
Description
files is as follows : File
RETAIL*
MktPrice
The share price [in pence] on a
particular date
ToMktCap
Total market capitalisation (i.e.
&
total number of shares x share
INDUST*
price) [in million]
DivYield
Dividend yield (i.e. cash dividend/share price) [in %]
PERatio
Price Earnings ratio (i.e. price earnings / EPS approx)
Beta
A measure of a company's 'systematic' risk
TotSales13
Total sales for 2011 accounting period [in million]
TotSales14
Total sales for 2012 accounting period [in million]
CapEmp
Total capital employed per the company's last accounts [in million]
Dividend
Most recent cash dividend per share [in pence]
MktBook
Ratio of market to book value of equity

Ret13
Ret14
NewCo*
SecRet
MktRet
CoMktBk
SecMktBk
CoTotCp
SecTotCp

Return on company's shares excluding dividends (i.e. (change in

MktPrice over last year from the date of data extraction) / Mkt Price
at start of 'year ') [in %]
Return on company's shares excluding dividends (i.e. (change in
MktPrice over previous year) / Mkt Price at start of 'year ') [in %]
CoRet
Monthly return (%) on 'NewCo'
share price excluding dividends
Monthly return (%) on the sector index excluding dividends
Monthly return (%) on the market index excluding dividends.
Inovates : Ratio of market to book value of equity
Sectors average Ratio of market to book value of equity
Inovates Total market capitalisation (i.e. total number of shares x
share price) [in million]
Sectors average Total market capitalis