Evaluation of investment performance - Portfolio Investment

Project Description

Working in groups of no more than 4 students, you will manage (fictitiously) a stock portfolio initially worth US$ 1,000,000 over an 8-week period. You will pick stocks, and then track the value of your portfolio and possibly rebalance your portfolio over the course of the semester. You should track the value of your portfolio at least once weekly and report stock prices, portfolio value and major indices. You should also keep track of the main financial news events that affect the value of your portfolio over the investment period (using the Internet and/or any newspaper/magazine of your choice). Student will use the Stock-Trak Portfolio Simulation program (www.stocktrak.com) to manage and track their investment portfolio.


You will need to select an investment objective carefully. To inspire you, I suggest that you take a look at some mutual fund descriptions available on the web, for example at www.fidelity.com (that gives you access to detailed information on several thousand funds, via FundsNetwork). The Internet has a tremendous wealth of useful information: e.g., money.cnn.com, bloomberg.com, quicken.com.

The composition of your portfolio should reflect your investment objective, as well as your outlook on the current state of the economy and individual securities. You can rebalance your portfolio following news and/or market fluctuations, but I do not require that you rebalance your portfolio over the course of the semester. In any case, you will need to justify your trades (or the fact that you chose not to trade after the formation of the portfolio).

Your portfolio will consist of regularly traded US equities. You will be charged a flat commission of 10 USD for each trade. Total number of transactions is limited to 200 over the simulation period. You may buy on margin and sell stocks short, but it is by no means necessary to do so.

The starting date for the project is(Friday). The closing date of the portfolio is (Friday). The written report will be due on.

I understand that the task of picking a portfolio may seem daunting at first, but there are a lot of free, helpful resources on the Internet:

·         finance.yahoo.com (and surely many other places) has “stock screeners” that allow you to select stocks on the basis of criteria you choose.

·         mutual funds descriptions with a lot of detail, including funds’ main holdings, are readily available on the Internet (for example on Fidelity.com).

·         numerous places offer “top picks” lists.

Feel free to use all of these tools and information. This is not cheating, as long as you can justify your choice of holdings in your own words


You will not be evaluated on the basis of your investment performance. The point of this exercise is not to demonstrate your abilities to beat the market (or make a fortune) over a few weeks. Rather, it is to: (i) acquaint you with the properties of security prices and how these react to news events; (ii) make you formulate a coherent investment strategy and pick securities accordingly.

The initial value of your portfolio will be US$ 1,000,000. Purchases will be made using the prices prevailing on

You will be required to turn in:

·         A short memo outlining your strategy and initial holdings on , in class. A late or missing memo will result in your project grade being reduced by 30%.

·         Your holdings will be liquidated on .

·         Your final paper on the last day of class on (must be handed in class and submitted on blackboard).

No late paper will be accepted; if you’re risk-averse, you should plan to hand in your paper a couple of days ahead of time.

The initial portfolio selection memo should be typed, look professional, and be 1 or 2 pages long. It should include your investment objective (including your horizon, which does not have to coincide with the 8-week investment period), your investment strategy, and the initial composition of your portfolio, with a concise and general (no need to discuss each stock in detail!) justification. The description of your holdings should include the name of each security, number of shares held, and their dollar value in your portfolio.

I understand that, at the time when you initially form your portfolio, the course will just have started and most of you will likely not be very knowledgeable on the topic of portfolio management. I will take this into account, but don’t use this as an excuse to forget all common sense. In particular, do not put all your eggs in the same basket!

Your final paper should be well-organized, concise, typed, double-spaced, and professional-looking. You shouldn’t need more than 15 pages (not counting appendices such as tables, graphs, and references. Your paper must include some quantitative analysis of the risk and return of your portfolio and some comparisons with one (or more) major stock indices and some mutual funds with similar objectives. At least two charts must be provided (one with the initial composition of your portfolio; and one with the evolution of the value of your portfolio over the investment period and some comparisons).

You are free to organize your work so as to make it as interesting as possible, but you should probably include the following:

·         Your investment objective

·         Your investment strategy

·         The initial composition of your portfolio (with a detailed justification)

·         Your additional trades if you decide to make any transactions (with justification)

·         The main economic and financial news that affected the value of your portfolio

·         Do you think you were consistent with your objective?

·         What would you do differently based on what you learned from this course or the recommended readings?

You may want to use the notions discussed in class (or notions that I will likely not have time to cover but that are described in your textbook and recommended readings). You should be aware that I particularly appreciate conciseness and clarity of style.


Every two weeks a member of your team will be required to perform an individual short presentation (no more than 7 minutes)and give reasons of good and bad performances. Students are highly encouraged to show tables, graphs, measures of return and risk, measures of portfolio performance, as well as other tools and options provided by stocktrak website. The schedule of the presentations is as follows:

First short presentation:   Feb 12 (Groups 1 to 4) and Feb 19 (Groups 5 to 8)

Second short presentation: Feb 26 (Groups 1 to 4) and Mar 11 (Groups 5 to 8)

Third short presentation:   Mar 18 (Groups 1 to 4) and Mar 25 (Groups 5 to 8)

Fourth short presentation:   Apr 1 (Groups 1 to 4) and Apr 8 (Groups 5 to 8)

The final project presentation will take place during the final week of the semester. It should be well organized and every student (within the group) should have a separate part of the overall submitted presentation slides.

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Evaluation of investment performance - Portfolio Investment

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