AD 470 Investment Analysis and Portfolio Management
Fall 2015
The purpose of using Virtual Stock Exchange is to give you a better understanding of trading strategies and portfolio management. You will also learn a variety of financial instruments and their risks and rewards as they apply to asset management.
Acting as a prospective portfolio manager for AD470 clients, your potential clients have entrusted you with $150,000 to invest at your discretion for a period of 10 weeks.
They are expecting you to invest their money wisely and profitably. While your clients desire a high rate of return, but they do not like taking too much risk.
Specifically, they are concerned about the following criteria:

Absolute return: The total dollar increase in the portfolio over the trading period
 Risk-adjusted return: The return on the portfolio taking into account the level of risk assumed by you, as measured by the Sharpe Ratio
To register your account, go to: http://www.marketwatch.com/game/ad470-investments-fall-2015
Login: (to be announced in class) Registration is free.
Enter the login code above.
Date Event
Weeks 1-2 Virtual Stock Exchange open trading
Practice trading for the next two weeks
(Weeks of Sept 30 and Oct 7)
Week 3
Join Class Game [INSERT NAME]
(Game is on: October 12 nd )
Week 4
Philosophy, Process and Portfolio Statement Due
(Due date: October 21 st )
Week 5-10
Week 11
Virtual Stock Exchange trading
(Trading ends by Dec 18 th , 23:00 İstanbul time)
Final Portfolio Management Debrief Paper due
(Due date: December 23 th )
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The MarketWatch Virtual Stock Exchange is available for practice trading now, but the competition does not begin until for 2 weeks. I encourage you to use the two-week period to fully understand the game mechanics, try some strategies, and get a feel for the market as it is now.
Your portfolio will be evaluated beginning on Week 3 (October 12 nd ). You will receive the
$150,000 in assets to begin investing for your potential clients then. By October 16 th you should have constructed your whole portfolio.
Select from the allowable set of investments securities subject to the restrictions listed below.
 You may purchase any combination of securities allowed by the game.

All cash must be invested. If you want liquidity you have to invest in a money market fund.

You must purchase at least five different securities (a max weight of 20% each)

I suggest you to invest no more than twenty securities.

You can trade as often as you like but will be required to document all transactions and appropriate commissions, including all relevant documentation for prices.

Common stocks typically trade in contracts of 100 shares.

Should you wish to make a purchase on margin, i.e., via borrowings against your portfolio assume the margin requirement is 50%. Be aware if your portfolio value falls significantly you could be subject to a margin or maintenance call.

You are allowed to short a stock, i.e., sell it without owning it, but you will be required to buy it back before or on terminal date.
 Cash must not exceed 20% of your portfolio at any time. We want you invested, not sitting on the sidelines.
This 2-3 page double-spaced paper is due Week 4 (Oct 21). In addition to your philosophy and process, please include the initial positions for your portfolio and your allocations to each position within the constraints above. For this purpose you can use the simulator’s “portfolio holdings and transactions” functions. Another option is to use AD470 Trading Sheet Template .
You are required to liquidate your portfolio at the end of the day December 18, 2015. A threepage (max.), double-spaced text about your Virtual Stock Exchange experience will be due at the end of the semester (December 23, 2015).
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Please address the following in your text:
 What are the key things you learned from your Virtual Stock Exchange experience?
 How will your Virtual Stock Exchange experience influence your personal investing in the future?
 Which positions exceeded your expectations? What conditions caused this?
 Which positions underperformed for you? What factors created the performance gap?

Please compute and include the following in your report:

The transaction history (with commissions) for all trades from start to the end.
 The ending portfolio value.

Calculate your investment portfolio return and annualize this rate of return.

Calculate the return for the S&P500 index for the same period of investment.

How did your portfolio perform relative to the S&P 500?
Sources that you may find to be particularly valuable for your research include:

MarketWatch: http://www.marketwatch.com/

Wall Street Journal: www.wsj.com

Yahoo Finance: finance.yahoo.com

Daily Treasury Yield Curve Rates: http://www.treasury.gov/resource-center/datachart-center/interest-rates/Pages/TextView.aspx?data=yield
 Walker Management Library: Walker Management Library Research Links for
Managerial Studies Students
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