Stock-Trak Stock Market Game

(Begin date: Aug. 31-Monday; End date: Nov. 20-Friday)

Your class ULL-FNAN505-Fall2009 has been registered at StockTrak.com. To register in this class code, you can use the following link: http://v2.stocktrak.com/public/members/registrationstudents.aspx?p=ULL-FNAN505-Fall2009. After registering online, read trading rules, then FAQs, and then acquaint yourself with Help Desk.

Stock-Trak Portfolio Simulation Game and Performance Report.

The goal will be to beat a passive $1,000,000 benchmark portfolio comprised of 50% U.S. equities (an "index fund"), 40% long term government bonds, and 10% cash (short term money market instruments). Students will apply the concepts learned in the course to select which bonds, stocks or mutual funds to buy and which to sell, and to evaluate the relative performance of the portfolio. Each student will join an investment team and will participate in a portfolio simulation exercise managing $1,000,000 over the semester. The simulation is professionally-managed by Stock-Trak Portfolio Simulations based in Atlanta, GA (www.stocktrak.com). Each team can invest in any NYSE, Nasdaq-AMEX stock (with traded price over $5), a series of government and corporate bonds, a selection of over 2000 mutual funds and certain stocks trading on stock exchanges around the world, including London, Paris, Frankfurt, Mexico City and Tokyo. To manage your risk exposures, your investment team can also invest in various options and futures contracts. Review your account activity, class rank as well as background resources for researching stocks, with price quotes and charts. Investment teams can buy on margin and sell securities short. The requirements for this component of the grade are:
  1. Prepare a Fund Prospectus. This statement should be in the form of a one-page, brochure or one-page "specification sheet." It should describe the investment style, restrictions on certain asset classes, name (or names) of investment manager (or managers), benchmark index for performance assessment, expected turnover activity and anything else a potential investor might expect. This prospectus is worth 5% of the 20% allocated to this component of the final grade. It is due to me by September 21. You may change your portfolio as often as you wish, but every transaction costs money. Changes must be made through Stock-Trak. You should remain fully invested. Make sure to invest at least in 10 stocks (which have 5-yrs. of monthly data in Yahoo). We are going to do some analysis of these ten stocks. Keep track of your portfolio's performance on a weekly basis. Don't know where to start? Look at morningstar.com or lipperweb.com for some top-performing funds and fool.com for stock ideas.
    If you want to invest a certain dollar amount in particular bonds, you need to know the price. Stocktrak tells you which bonds are available for purchase on its "read the rules" section. You can find bond price quotes at bondsonline.com. This site enables you to quickly enter criteria (such as maturity in years for Treasurys, or the company's name for corporates) and get a price.

    Online Investment Help

  2. At the end of the semester, each team will prepare a final performance report that (1) tracks the week-to-week performance of their portfolio, (2) analyzes the macroeconomic, financial market and stock-specific news events that may have affected the risk and return performance of their portfolios, and (3) evaluates statistically their relative and absolute performance using various tools and techniques.
    Report: Use of a spreadsheet program such as Excel is highly recommended. Among other things, report should contain:
    1. For each security,
      • price level and change (performance)
      • a measure of historical return. I suggest 5 years.
      • a measure of the security's risk -- if possible, the standard deviation of returns. I suggest 5 years of monthly data. You can obtain data from the Microsoft Investor site, http://investor.msn.com/research/welcome.asp (use "charts" to download data) or from Yahoo at http://quote.yahoo.com/
      • the betas of each security
    2. For the whole portfolio,  your goal is risk analysis and perfomance analysis:
      • Estimate the degree of diversification of your portfolio, using the tools of portfolio diversification. One way is by registering  at riskgrades.com and plugging in your current portfolio as well as checking the effect of changing the weights. You also can obtain sector performance results from the various sector indexes at bigcharts.com
      • Find the portfolio beta
      • Find the portfolio expected return, using the T-bill rate as the risk-free rate and 12% as the market return
      • Measure the portfolio's excess return: the difference between the actual and the expected.
      • Measure performance relative to the benchmark portfolio
      • Use the Sharpe, Treynor and Jensen measures. You'll need the beta, average return and standard deviation of your portfolio and of the benchmark. For a sample see the spreadsheet, benchmark.xls
      • Conduct a performance attribution analysis (see relevant chapter in textbook)
        1. contribution of asset allocation to performance
        2. contribution of stock selection and bond selection to performance
        Note: you can get charts and downloadable data on the benchmark components (FUSEX and VUSTX) at quote.yahoo.com/
Note that your grade is not related to the investment performance, but rather the quality of the analysis. The report will be no more than ten pages long (double-spaced, single-sided, 1-inch margin), not including various exhibits, figures and graphs to support the analysis (maximum 20 pages). Please do not hand in reams of computer output. Instead insure that the output that you chose to include is carefully edited to allow the reader to identify quickly your analysis and conclusions. Factors such as clarity and conciseness will be considered heavily in grading your work. In particular, explain carefully any technical material that you used. Always give a bottom line to your findings. Enclosea diskette with files in Word and Excel showing all your work neatly organized and documented. Make sure to add a footer containing your name to your Word and Excel files. The report is due on November 30, by 6 p.m. This report is worth 15% of the 20% component allocated toward the final grade. Penalties for turning in the paper late will be (the n umber of days late)^2, e.g., three days late would be a penalty of 3^2=9 points. The penalty will be subtracted after the project/paper is graded on a normal basis. Do not start your search or paper late.

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An Update

your accounts will be activated on August 31 with $1,000,000. Please note that the top 3 performing students will get 5 extra credit points on their final exam grade, and the 3 worst students will get 5 points taken off their final exam grade