Virtual Stock Exchange
Portfolio Management Project
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.
Project Overview and Goals
Acting as a prospective portfolio manager, your potential clients have entrusted you with $1,000,000 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, their tolerance for risk is not very high.
Additionally, your prospective clients are considering other asset managers (your classmates) and will be ranking each according to the success of their portfolio management. You will be able to track how you are measuring up throughout this exercise.
At the end of the trading period, if your clients are satisfied with your performance managing their portfolio, they may extend their relationship with you.
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.
|February 8||Virtual Stock Exchange trading Starts|
Virtual Stock Exchange trading Ends
Final Portfolio Management Paper due
Portfolio Management Constraints
- You can invest in US Stocks, Exchange Traded Funds (ETFs) and Mutual Funds.
- Each position you take in an asset must be a minimum of 2% of your assets and a maximum of 10% of your assets.
- Cash must not exceed 20% of your portfolio at any time. We want you invested, not sitting on the sidelines.
|$10.00 per trade|
|5.00% of shares outstanding|
Sources of Information for Portfolio Managers
You can use the following Portfolio Tool to calculate the optimal mix of stocks, mutual funds, ETFs based on the Modern Portfolio Theory:
Other sources that you may find to be particularly valuable for your research include:
- MarketWatch: http://www.marketwatch.com/
- Wall Street Journal: wsj.com
- Yahoo Finance: yahoo.com
- Morningstar: morningstar.com
- Barrons: barrons.com
- CNBC: cnbc.com
- Seeking Alpha: http://seekingalpha.com/
- Portfolio Management Tool based on Portfolio Theory
Final Virtual Stock Exchange Paper
A detailed write-up (minimum 5 pages, maximum 10 pages) about your Virtual Stock Exchange experience will be due at the end of the semester. Please address the following:
- Please explain in detail the research or the trading strategies you used for your trades.
- Which positions exceeded your expectations? What conditions caused this?
- Which positions underperformed for you? What factors created the performance gap?
- Portfolio Performance Evaluation: Compute risk adjusted rates of return and loadings on different risk factors such as the market and use them to evaluate your investment performance.