January 2015
FINANCIAL
TIME
Published by the Student Chapter of the Financial Management Association at Western Washington University
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Random Portfolio
Experiment
Welcome Back!
The
Western
Washington
University student chapter of the
Financial Management Association is set
to have a very busy winter quarter.
Advised by Earl Benson, Professor of
Finance, the group strives to advance its
members’ knowledge and interaction
within the financial community, as well
as providing a social network
encouraging student participation. If you
are looking for a great way to enhance
your own contact and understanding
among the various financial professions,
the Financial Management Association is
just for you.
–Kevin Townsend, V.P.
Officers
These are your student-elected
officers. Please feel free to contact them
if you have any questions. Two officers
are no longer at Western, meaning that
we will be holding elections during our
first meeting this quarter.
President: Vacant
Vice Pres: Kevin Townsend
townsek@students.wwu.edu
Secretary: Tristyn Moon
Tristynmoon@gmail.com
Treasurer: Vacant
FIN 341 Tutors
The
Financial
Management
Association provides tutors for students in
the FIN 341 classes. If you received a “B”
or better in FIN 341, please sign up to be a
tutor. (To do so contact Kevin
Townsend.) Here is the current information for the tutoring center:
Tuesdays, Thursdays from 12-3
Parks Hall 336
We hope to see you there!
Winter Schedule
All meetings are in PH 104 at 5:30 pm,
unless
otherwise
announced.
The
following is the meeting dates for winter
quarter.
January 15: Winter kickoff meetingfree pizza
January 22: speaker- Ben Esget;
Owner; Wealthmark, LLC
February
5:
speakerTrina
Schurman; Director of Investor
Relations; Nordstrom
February 19: speaker- Bill Miller;
venture capital
March 5: TBA
First-Meeting
The following is a brief summary of
the topics that will be discussed at our
meeting on Thursday January 15:
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Officer elections
Student scholarship portfolio
management
Equity research teams
Finance tutoring center
Upcoming field trip
Upcoming speakers
General FMA planning
And much more!
During the fall quarter, ten FMA
members participated in an event to
construct a completely random portfolio
of stocks to see how it would perform
compared to the major stock market
indices. This type of activity is based on
Dr. Malkiel’s random walk theory as
explained in his book A Random Walk
Down Wall Street. Since Dr. Malkiel
believes in the semi-strong form of the
Efficient Market Hypothesis, he asserts
that, on average, anyone can construct a
stock portfolio just as good as any
financial investor can by simply throwing
darts at a dartboard.
To test this assertion, the ten FMA
members selected five stocks each by
throwing darts at a coded dartboard to
produce a ticker symbol. Overall, 50
randomly generated stocks were selected.
We theoretically invested $1,000 into each
stock on November 6th, altogether making
a $50,000 portfolio. The following is the
first update of our portfolio as of January
7th.
Random Portfolio:
Rate of Return = -4.61%
New Portfolio Value = $47,693.01
Comparable Stock Indices rate of
returns from 11/6-1/7:
S&P 500 = -0.30%
Russell 2000 = 0.35%
Dow-Jones = 0.06%
In general, not only did our randomly
generated portfolio perform poorly during
this two month period, but it
underperformed the broad market indexes.
The market remained stagnant, hovering
around a 0% gain, while our portfolio lost
4.61% of its value. Although the portfolio
is currently performing poorly, two
months is not nearly enough time to draw
any conclusions. We will continue to
monitor our random portfolio and provide
subsequent updates.