Report on Stocks Assignment | Essay Help Services

In class, we have worked for 6 weeks on stocks and on the site “stocktrak” by purchasing stocks and calculating our returns and other many calculations … – I will upload all my calculations and screenshots of what i have done throughout those 6 weeks and you will have to write a report on it. * I will upload a word document that clearly explains all the instructions and guidelines of this report, please read carefully till the end.

Risk analysis ( Dealing room )

Instructions:

1) This is an individual project.

2) Word limit: 2000 words (excluding graphs, tables, charts and all Appendices)

3) Assignment carries 30% weight of the final assessment. The assignment

carries 100 marks.

4) Assignment must be submitted on time.

5) Late submission will be penalized as:

1. 5% deduction each day for the first six (6) days late submission
2. Assignment will not be graded or accepted after 6 days.

8) Dealing Room resources must be utilized in order to fully complete this project. Check your schedule on student whiteboard. In addition, where appropriate, you MUST refer to other relevant journals/publications in support of your work.

9) Photocopying, cheating or any other academic dishonesty will not be accepted.

10) All references must be provided (Harvard style).

PROJECT DETAILS

Portfolio Simulation & Risk Measurement

In order to apply concepts learned in class and gain practical experience, each student will assume the role of a fund manager and to design and execute an appropriate strategy to maximize the portfolio’s return and measure its risk over the five (5) week investment horizon. The clients of the fund have specified capital appreciation as the main investment objective and have no short-term cash needs.

This project will help you learn about the ‘real-life’ market mechanism of portfolio risk measurement, including the terms and terminology of trade execution and the general market environment. Concentrate on the differences between assets (e.g., risk/return characteristics, trading rules, capital requirements) and take advantage of the opportunity to learn about order submission, transaction costs, etc., while managing the money as it would be your own.

This assignment is worth 30% of total grade. While the emphasis for the project is on your education and not on portfolio return, you need to be careful in taking excessive risk to maximize return. Performance is measured on a risk-adjusted basis and the goal is to maximize your risk-adjusted return, defined as the Sharpe ratio of your portfolio.

Your challenge will be to design and execute an investment strategy that satisfies the client over the 5 weeks investment period and create and measure the risk of a virtual investment portfolio with initial funding of USD 1,000,000. Each student will use (mainly) Portfolio Simulation program to manage and track the investment portfolio. The program acts like a discount broker and provides trading environment very similar to the real world. You will be charged commission for each trade. Total number of transactions is limited to 200 for the simulation period.

Portfolio construction can be from Common stocks that are traded in NYSE, and Nasdaq-AMEX stock. Trades can be submitted by the simulator web page.

The final portfolio must contain securities from different sectors to maintain a level of diversification. Students are free to adjust their portfolios based on their capital market expectations. However, the justification and economic rationale for the asset allocation and selected securities should be provided in the report.

Portfolio Management Rules

• To help in managing your risk exposure. Each position should not exceed 10% of your total assets.

• You will trade in stocks. Make sure you understand quite well the instrument you are buying.

• Make sure you familiarize yourself with the simulation program trading rules and risk measurement techniques.

Report Writing:

Write portfolio performance reports. Use of a spreadsheet program (Excel) is a must.

1. 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 index?

2. 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 http://quote.yahoo.com)

▪ Measures of the security’s risk: `

(a) The standard deviation

(b) Beta

3. 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

1. 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

2. 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.

3. Conclusions

▪ 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?

Grading will be based solely on the logic and consistency of your selections and reports. You will not be graded on the basis of investment performance; rather, you will be expected to:

▪ set investment goals

▪ track your portfolio’s performance, and that of the benchmark portfolio, each week

▪ prepare for classroom discussion of important events in the markets that may affect the risk or return performance

▪ produce performance reports as required.

Sources of Information

▪ CNBC: http://www.cnbc.com/

▪ Wall Street Journal: www.wsj.com

▪ New York Times: www.nyt.com

▪ Investopedia: www.investopedia.com

▪ MorningStar: www.morningstar.com

▪ Financial Visualizations: www.finviz.com

▪ Yahoo Finance: finance.yahoo.com