- Report Writing:
Write portfolio performance reports. Use of a spreadsheet program (Excel) is a must.
A. First Report:
1. Discuss your beginning portfolio strategy and security selection process:
▪ Link your market strategy with general market outlook for the year.
▪ What index are you going to try to beat with your stock picks? Why did you pick that
For each security in your initial portfolio, calculate and comment on the following:
▪ Price level and percentage change so far
▪ A measure of historical returns. (5 years of monthly returns – can be obtained from
▪ Measures of the security’s risk: `
(a) The standard deviation (b) Beta
For the whole portfolio, calculate and comment on the following:
- ▪ total portfolio gain/loss in dollar and percentage terms
- ▪ Total portfolio Beta
- ▪ Find the portfolio expected return, using the T-bill rate as the risk-free rate and 12% as the market return
- ▪ The correlation matrix
B. Second Report:
▪ Revaluate your risk level by forecasting where the market is heading in the future. At this stage you might have to sell or buy securities.
1. For each new trade in your portfolio, calculate and comment on the following:
▪ Justification of the trade ▪ Expectation
For the whole portfolio, conduct performance analysis:
- ▪ Measure absolute performance
- ▪ Measure performance relative to the benchmark portfolio
- ▪ Measure performance relative to the risk-adjusted expected return, based on your portfolio’s average beta
- ▪ Measure the portfolio’s excess return: the difference between the actual and the expected.
▪ Conclude with a critique of your portfolio – what would you have done differently knowing what you know now? This does not mean using perfect hindsight to decide what stocks you should have purchased! Rather, suppose you were starting today. Given your current knowledge of the stock market compared to earlier in the semester, what would you have done differently in terms of your portfolio strategy and your security selection process? What lessons from the game were useful?
Sources of Information
▪ CNBC: http://www.cnbc.com/
▪ Wall Street Journal: www.wsj.com ▪NewYorkTimes: www.nyt.com ▪Investopedia: www.investopedia.com▪ MorningStar: www.morningstar.com
▪ Financial Visualizations: www.finviz.com ▪ Yahoo Finance: finance.yahoo.com