Portfolio Management – Investment Club Learning Module


To construct and manage a portfolio of equities within the limitations of the scenario set out below. This will involve reading the financial press, interpreting information, analysing information and where appropriate speculating upon it.


You are required to set up an Investment Club with the objective of constructing and managing a portfolio of shares. The members of the club have agreed to invest a total of £200,000. A non-active member of the club has contributed £100,000 of this total sum. The members of the club have agreed that half of the £200,000 will be invested in speculative short-term stocks and the other half to be invested over the medium/long term. All the members have taken the precaution of maintaining a substantial amount of liquidity in low risk investments such as building society accounts and therefore all the money is to be directed towards maximising the return on capital via an equity portfolio.


  • Week 12. Team formation and role agreement. Three or four (Investment Club) teams will be formed per seminar group with each team agreeing specific roles for their members. Roles will need to be agreed bearing in mind 1st presentation requirements and thought also given to how these roles will change after this event.
  • Week 25 or 26. Construction of the portfolio presentation (formative assessment).
Learning outcomes tested are 2, 3, & 4 (see page 10 for a full list of outcomes & descriptions)

At this event you will need to convince the non-participating member (tutor) who is prepared to invest £100,000, that the club is going to meet his/her expectations. Each team will have analysed their agreed market areas/sectors in line with their general strategies and objectives. It is expected that the economic and sector analysis will be of a good standard at the time of this event. Specific company analysis is not an important feature of this presentation but will need to be completed by the end of week 28. All available monies must be invested by Friday 4pm of week 28.

In order to reach an acceptable standard in this formative assessment element students should ensure that their team:
  1. Provide a clear insight into how security analysis and portfolio theory will affect the decision making process
  2. Discuss their strategies to be adopted and why (both group and portfolio), including aims/objectives that will enable the club to measure their group and portfolio performance
  3. Stipulate realistic legal and administrative processes that would be necessary/desirable in setting up the club. ‘Legal and administrative processes’ means justifying why you have decided for instance to form a partnership instead of any other type of business organization e.g. a limited company and how you go about setting up your chosen formation method e.g. do you need to all sign some form of partnership agreement – & can you compare yourselves with how a real investment club has set itself up.
  4. Demonstrate a reasonable standard of presentation skills within the time limit set.
  5. Each team will have a maximum of 15 minutes to complete their presentation. Pertinent questions may be asked at the end of the presentation (though time restrictions may prevent this) by the non-participating investor (tutor). The quality of the answers provided will be taken into account in the assessment.

Very good standard presentations will:
  1. Fulfill the pass criteria
  2. Complete a very good economic and sector analysis related well to the portfolio decision making process, including reasons why foreign economies will/will not affect strategies/decisions
  3. Provide an overview of foreseeable challenges and how they will be overcome. ‘foreseeable challenges’ will probably be most associated with either your ability to work effectively as a team or concerned with the strategies/analysis you intend to put into action – but could be other things like the challenge associated in achieving your own set performance targets. Challenges will differ in type and degree from team to team.
  4. Demonstrate a very good standard of presentation skills within the time limit set.

The criteria required to achieve each grade is shown in appendix 1

  • Weeks 28 – 34. Progress reports to be submitted to the tutor every two weeks during this period (submit reports in weeks 28, 30, 32 and 34) at the place and time specified and in the prescribed form (see appendix 2). No further trading will be expected after week 35 though students can continue to monitor their portfolio performance if they wish up to their final presentation in the third term. During the trading period it is advisable to keep a ‘client’ file, containing details of the portfolio from its initial inception to the current position. The information contained within the file could include:
    • The group’s strategies
    • When and why buying and selling transactions were carried out
    • An evaluation of the portfolios performance.

This file is for your own group records and will not be viewed by the tutor. However it will be useful in keeping a detailed record of the Club’s activities. This in turn will provide useful background information for the 2nd presentation event and assist in preparation for the exam.
  • Weeks 38 or 39. Running the portfolio presentation (formative assessment)
Learning outcomes tested are 1 -5 (see page 10 for a full list of outcomes & descriptions)

Each team will have a maximum of 15 minutes to complete their presentation. Pertinent questions may be asked at the end of the presentation by the non-participating investor (tutor). The quality of the answers provided will be taken into account in the assessment.

The criteria required to achieve each grade is shown in appendix 3. Note that this is a formative assessment and the grades awarded do not contribute towards your module grade.

Portfolio Management – Various Scenario Simulations

Stock Trak – Week  1 Assignment

You are a portfolio manager at a private bank and have recently been assigned three new Naples based clients. 

  • Martha is 30 years old. She is a single parent and recently inherited a large sum of money. She is looking to buy a home in three years or less, save for her daughter’s college, plan for retirement.
  • Keith and Debbie are both 45 years old, married, with two children. They both work and have retirement plans but don’t know anything about them at all. They are concerned about future college expenses and retirement.
  • Bernie is 68 years old. He has been retired for 4 years. He owns his home outright (i.e., no mortgage).
  • Using Exhibit 2.1 of the text (page 35 or see below), create three portfolios suitable for each client. Each portfolio has a value equal to $500,000. The clients only want to invest in US assets.


Required Paper Discussion:

  1. Describe each of the clients, their needs and objectives.
  2. Describe why you chose the assets in the portfolio.
  3. How did you decide the amounts to invest into each asset?
  4. During this first week, you must make at least two trades/position adjustments. You are not constrained to the minimum number of trades. Describe what you traded, why and the portfolio results.
  5. How often do you expect to trade in each of the accounts?

Stock Trak – Week  2 Assignment

Changing the portfolio

Martha was looking at textbooks in the Hodges University bookstore. She came across the Investment Analysis and Portfolio Management book we use in class. In particular, Exhibit 3.1 caught her attention.

Martha has decided that she wants to change her portfolio around some.

  • First, she wants a global portfolio. You know, “the US is sort of small.”
  • Second, I want active management because “I hear that a good portfolio manager can make me money. And you’re good, right?”
  • So you must actively trade her portfolio during the rest of the term. Martha’s expected portfolio turnover is 30% per week.
  • You are not allowed to sell something and then buy it back that same week. You must sell and buy different assets.
  • You are allowed to sell something one week and buy it again if more than one week of trading has passed.


To help you find some ETFs, in addition to Stock Trak, you might look at:    http://etfdb.com/types/ Stock Trak – Weeks 3, 4, 5, 6 Assignment EVERY WEEK for Martha’s portfolio:  

  1. Present a summary log of the trades you did.
  2. Portfolio Values: Current, Last week, Weekly change, and Inception to Date Change (ITD).
  3. A short discussion on all the trades you did, what and why you traded. 


Additional Rules:

  • Ensure that Martha’s portfolio has a 30% WEEKLY turnover
  • You are not allowed to sell something and then buy it back that same week. You must sell and buy different assets.
  • You are allowed to sell something one week and buy it again if more than one week of trading has passed.
  • For ETF’s, you might refer to: http://etfdb.com/types/



Martha:  Current value = $XXX   Last Week Value = $YYY  Weekly Change =  $$$$ and HPY   ITD =  HPY  

Trades:  what you bought and sold, INCLUDE Dates and Prices

(Note: Sum Total of Buys must equal 30% of the prior week’s value at a minimum.)


Short story – on why you did the above


Using the closing prices for Friday Oct 21, 2016 – do your final calculations.



Review the performance of the portfolio. Show:

  1. At the top of the paper, include a table that shows:
    1. Total Portfolio Value
    2. Total Portfolio Return
    3. Total Number of Trades
    4. Sharpe (available on Stock Trak)
    5. Alpha and Beta (available on Stock Trak)
  2. Discussion (i.e., essay):
    1. The SPY (S&P 500) closed on Sep 13 at 212.16.
    2. What was the closing value of SPY on Friday Oct 21?
    3. If Martha’s entire portfolio ($500,000) was invested into SPY at Sep 13’s closing value (price = 212.16), how many shares did she have? Do not include fractional shares.
    4. Assume the interest earned on this benchmark portfolio was zero. What is the SPY portfolio worth as of Friday’s close?
    5. How does your portfolio compare to that?
  3. Using the values from Stock Trak for Sharpe, Alpha and Beta FOR YOUR PORTFOLIO –
    1. Discuss what those values mean.
    2. Using this information, what can you say/extrapolate about your portfolio risk and return?
  4. Discuss your portfolio’s performance
  5. Lessons learned
  6. Include references when appropriate.



Investments – Security Analysis Project

Stock-Trak Project

Requires weekly trades, explanations, and a final report (22% of total grade).

Two portfolios are tracked for each student. One portfolio is passively managed after the first week, and the second portfolio is actively managed given weekly requirements. The portfolio has a total return objective.

Week 1 (trades from Feb 8 through Feb 12)

Students purchase (broad index) ETFs to construct a portfolio that is consistent with the following asset allocation guideline (at market value).   For the fixed income portion of the portfolio, students use a combination of Treasury Bonds and fixed income ETFs (or ETNs).   Limit the amount invested in only one ETF or ETN to $100,000. Commodities can be purchased in the cash market (corn, wheat, gold, silver, and major currencies) or using an ETF; however, the real estate exposure must be obtained using an ETF on a broad real estate index. The passive and active portfolios should be established with approximately the same holdings and weights (i.e., same trades and same returns during the first week). I suggest placing these initial orders when the market is open (i.e., after 3 pm). The passive portfolio should not need to be adjusted during the remainder of the term.

Asset ClassTargetMinimumMaximum
U.S. Large Cap. Stocks40%30%75%
U.S. Small Cap. Stocks10%0%25%
Non-U.S. Stocks20%0%25%
Fixed Income20%15%60%
Real Estate3%0%10%
Commodities including currencies3%0%10%
Cash and equivalents4%0%15%

Week 2 (trades from Feb 15 through Feb 19)

Stops, shorting and buying on margin

  1. For the active portfolio, establish at least three stop loss orders for the ETFs in the existing portfolio (e.g., set the stop price at about 10% or more below the current price).
  2. Students establish a margin account by borrowing funds (i.e., in Stock-Trak, the margin loan occurs automatically when more securities are purchased than the cash that is available and/or by short selling). That is,

(a) buy additional shares of at least three ETFs in the existing portfolio (purchased in the first week) and

(b) short sell a health care sector ETF. The sector ETF will reduce your exposure to health care.

  1. Target the active portfolio value to be at least $1,400,000.

Week 3 (trades from Feb 22 through Feb 26)

Rebalancing and buying mutual funds, levered ETF and an ultra-short ETF

  1. Replace (i.e., sell) 20% of the large cap ETFs by purchasing an index mutual fund, and sell 20% of the small cap ETF by buying an actively managed small cap mutual fund(s).
  2. Increase the systematic risk of U.S. securities by selling regular broad index ETF and purchasing levered ETF like those from ProShares (e.g., Ultra S&P 500 with ticker of SSO).
  3. Reduce exposure to international equities by purchasing an Ultra-Short ETF like those from ProShares (e.g., Ultrashort MSCI Japan with ticker of EWV).

Week 4 (trades from March 1 through March 5)

Based on expectations of commodity prices, currencies, and interest rates, establish futures positions in commodity, currency, and bond (avoid purchasing a contract that is expiring in the current month).

  1. Use futures contracts to increase (or decrease) the percent of commodities and non-U.S. currencies in the active portfolio by at least 3% of the total value of the portfolio (e.g., if the current portfolio value is $1,500,000, then increase holding of a commodity by an additional $45,000 based on the notional, or contract, value of the futures contract).
  2. Increase (or decrease) the interest rate risk of the active portfolio by using a bond index futures by at least $100,000 in notional value. That is, buy T-bond futures to increase interest rate risk and sell to reduce interest rate risk.

Week 5 (trades from March 8 through March 12)

Futures transactions in equity market and adjustments for sector weightings (avoid purchasing a contract that is expiring in the current month)

  1. Based on expectations for the equity market, increase (or decrease) the systematic risk of the portfolio by using index futures (by buying or selling equity index futures). If the portfolio does not have sufficient cash for the margin required by the futures contract, then shares of ETFs will need to be sold.
  1. Adjusting sector weighting, leveraging and buying short positions. Establish sector over-weighting and under-weightings using ETFs or mutual funds in the portfolio for at least two additional sectors. Students can reverse the health care position from prior transaction.

Week 6 (trades from March 15 through March 19)

Option returns versus stock returns

(Avoid purchasing a contract that is expiring in March)

  1. Purchase three individual stocks by selling the appropriate ETF(s).
  2. For each stock, purchase an out-of-the-money call.
  3. For each stock, purchase an in-the-money call.

This is not an option strategy; however, I will want comments in the final report on the impact of buying an option compared to buying the individual stock (keep track of the returns on the stock (include dividends) and call options). See D2L announcement note for option symbol used in Stock-Trak.

Week 7 Spring Break

No required trades (from March 22 through March 26), but can trade to rebalance

Week 8 (trades from March 29 through April 2)

Basic Option Strategies  

(see D2L home for an announcement related to option symbols)

  1. Purchase two additional individual stocks (at least 100 shares) by selling the appropriate ETF(s). For each stock, purchase a put option to establish a protective put position.
  2. Purchase two additional individual stocks (at least 100 shares) by selling the appropriate ETF(s). For each stock, write a call option to establish a covered call position.
  3. Purchase a put option for one of the ETFs to establish a protective put position.
  4. Sell a call option for one of the ETFs to establish a covered call position.

Week 9 (trades from April 5 through April 9)

Advanced Option Strategies

  1. Establish a long straddle and a short straddle for two different stocks that are not currently in the portfolio. A long straddle requires the simultaneous purchase of a call and put for the same strike price, and a short straddle requires simultaneous writing of a call and put for the same strike price.
  2. For an individual stock not currently owned, create a Bull (or Bear) Money Spread (go to trade options − spreads and buy a call and write a call, where the call purchased has a lower strike price than the call that is sold).
  3. Purchase 3 individual stocks (that are new to the portfolio).  For each of the 3 stocks, create a collarA collar is basically a protective put plus a short call option.  Alternatively, a collar can be thought of as a covered call with downside protection. For each of the new stocks, buy an out-of-the-money put and an out-of-the money call for the same expiration month.  For example, immediately after purchasing a stock for $100, go to trade option and then to combo and buy a put option with a strike price of $95, and write a call option for $105.

Week 10 (trades from April 12 through April 16)

Trade at least ten individual stocks, of which at least two are from a foreign exchange and two additional securities are ADRS trading on a U.S. exchange; otherwise, there are no restrictions beyond Stock-Trak’s margin loans (trade as much as desired, but save enough transactions to close derivative positions and short positions in Week 12).

Week 11 (trades from April 19 through April 23)

After the in-class presentations, students are required to:

  • Buy 3 and short sell 2 of the stocks that were presented on Tuesday, and
  • Buy 3 and short sel1 2 of the stocks that were presented on Thursday.

Begin to close derivative positions (especially those with low volume).

Week 12 (trades from April 26 through April 30)

Rebalance the portfolio to be within the asset allocation guidelines after closing all derivative positions and short positions (volume may be an issue for closing some of these positions—try several times during the week for low volume issues).

Every Week

On Tuesday of each week, each student is required to turn in a summary and explanation of the trading activity in the active portfolio for the prior week (1 or 2 brief paragraphs). The top 5 portfolios based on total portfolio value will receive 5 bonus points, and the bottom five will lose 5 points (this is to prevent excessive risk taking).

The Weekly Stock-Trak summaries are turned into the dropbox in D2L as a word file and must contain the student’s name and indicate the report week (minus 5 points name or report week, if missing). Each student summary requires (no image files or print screens):

  • an explanation of trades made,
  • a comparison of the returns of the active portfolio to the passive portfolio,
  • completion of the statement: “This week, the most important insight gained (or technique learned) was . . . .” , and
  • proper citation of sources used in gathering the information used in the trade decisions.

Stock-Trak Presentation

A two to three minute PowerPoint presentation is required (assigned for either day 25 or 26, which is either May 4 or May 6). The presentation is due to a D2L dropbox on the presentation day and will summarize each student’s trading over the 12 weeks with slides that describe (or outline) the following:

  • Worst trade
  • Best trade
  • Most important insight gained from Stock-Trak

Final Stock-Trak Report

The final Stock-Trak report will include a discussion and analysis of the fund’s performance by comparing the active portfolio to the passive portfolio (and/or a major index). A summary of the individual stock trades and their performance is required. Students with portfolios with open positions in a derivative security will not be eligible for the bonus points.

Students with portfolios with open positions in a derivative security will not be eligible for the bonus points, and will have 5 points deducted from their score.

Final Stock-Trak Report: The report is required to be in a research paper format, which is organized using the following Template/outline and includes a discussion and analysis of each of the following:

  1. A comparison of daily returns of the active portfolio to the passive portfolio over the trading period (downloads daily portfolio values from Stock-Trak to an Excel spreadsheet, remove weekends, calculated daily returns).
    • Calculate and compare arithmetic and geometric means (daily and annualized).
    • Calculate and compare volatility measures; i.e., standard deviation (daily and annualized), range, coefficient of variation.
    • Compare other characteristics of the return series (i.e., skewness and kurtosis).
    • Calculate and discuss the correlation between the active and passive portfolio (does the correlation seem reasonable, given the trading in active portfolio?).
    • Regression of Active (y-axis variable) vs. Passive portfolio (x-axis variable) returns.
      • Intercept: What is the intercept’s value and is the intercept significant at the 5% level? Note: that the intercept is similar to the Jensen’s alpha.
      • What is the value of the beta coefficient and its interpretation?
    • Calculate and compare the HPR over the trading period for the active and passive portfolios to the S&P 500. Does the relationship seem reasonable given the risk associated with each portfolio/index?
    • Are markets efficient, nearly efficient or inefficient? (justify the response based on your trading)
  2. A comparison of the holding period return of the three stocks that were purchased relative to the three out-of-the money call options and the three in-the-money options on the same stocks.
    • Total investments in each stock, out-of-the money call, in-the-money call (include margin)
    • Total return on stock (include dividend if one was paid) and each call option
    • Compare the HPR on each stock and the corresponding options
    • Conclusions from options trades
  3. Examples of impact of risk and return from the following trades:
    • Protective puts
    • Covered calls
    • Other option strategies
    • Use of futures contracts
  4. What were the most important insights gained from the Stock-Trak simulation?
    1. From your trading strategies (required and/or otherwise)
    2. Market trends and conditions during the 12 weeks
    3. Overall
  5. Given the rules and quirks of Stock-Trak, how can the classroom experience be enhanced?

Appendices should include:

  • Data used in Excel spreadsheet (include arithmetic and geometric returns, daily means and annualized means and standard deviations)
  • Chart of daily portfolio values of active versus passive portfolios
  • Chart of daily returns of active versus passive portfolios
  • Descriptive statistics of the daily returns
  • Regression output of daily returns of active versus passive portfolios

Click Here for the full course outline and how this project fits in

Economics – Equity Markets and Institutions

The primary goal of the project is to gain an understanding of the investment process by becoming an interested participant. Students will participate in a portfolio simulation exercise by trading an initial wealth of $500,000.

Can we play the game in a group?

You can form groups of two, or play the game on your own, as you prefer. Each group of two needs only one Stock-Trak account.

What is the goal of the investment simulation?

Your goal is to maximize your risk-adjusted return, defined as the Sharpe ratio of your portfolio. Requirements for each student include: (1) tracking the performance of their portfolio each week through the semester; (2) being prepared for classroom discussion of macroeconomic, financial market, or other news events that might affect the risk and return of their portfolios; and (3) producing a report analyzing the performance of their portfolio over the semester. More details about the report are on the next page.

If it’s a game, who wins?

I’d like to think we’re all winners, but the investors who achieve the highest risk-adjusted return (as measured by the Sharpe ratio of their portfolio) will get an extra 5 points on their (50 point) Stock-Trak Report #3.

What assets can we trade?

Only common stocks, mutual funds and ETFs can be traded in the game (no bonds, no derivatives, no exceptions).

How do we trade?

Stock-Trak offers Web trading; details are in the registration materials or on the Web. Your account is limited to 200 trades for the semester; market orders and limit orders are allowed.

Do we ha-a-a-ve to trade? (often asked in a whiny voice)

Yes. Each investor group must execute at least 20 trades (defined as a purchase or short sale of a stock, mutual fund, or ETF) over the course of the game. For each trade short of this goal you will lose 2 points on your (50 point) Stock-Trak Report #3. See the Stocktrak Strategies handout for some ideas on how to get started. Note: a purchase and subsequent sale of a stock counts as one trade.

How do we track our performance?

Tracking your weekly performance using Stock-Trak’s web site is the best way to go. Registering and setting up a portfolio list in Yahoo! Finance (or any other financial web site that you are familiar with) seems like the easiest way to keep track of real-time news about any stocks that you have traded.

What should we do right away?

  1. Download and read the Stock-Trak rules (link is on class page).
  2. Register with Stock-Trak (on their Web site) as soon as possible to get ready to trade.
  3. Begin tracking the week-to-week performance of both your portfolio and your benchmark, including saving any news items you find regarding your stocks. Friday closing values will be needed to write your reports.
  4. Collect print or Internet articles that discuss your stocks and/or investment strategies. These will come in handy, for reference purposes, in writing your reports.
  5. Do not hesitate to talk to me about any issues or questions I have omitted.

A Brief yet Helpful Guide to the TPS[1] reports

For all reports, graphs, tables and charts that support statements made in your report should be placed in an appendix and should not be included in the page count for the report.

Report 1 (due 10/7; 2 pages max) 6% of final grade

  • Discuss your beginning portfolio strategy and security selection process. What index are you going to try to beat with your stock picks? Why did you pick that index?
  • In an appendix, present a “timeline” or chronicle of each of your trading decisions, and the thought process behind each trade. If you used a stock screener to pick stocks, be specific about the screens you used.

Report 2 (due 11/4; 2 pages max) 6% of final grade each

  • How did your portfolio/stock picking strategy change during this session, either in response to concepts discussed in class, or in response to economic (market, industry, or company-specific) events during the semester?
  • In an appendix, present a “timeline” or chronicle of each of your trading decisions, and the thought process behind each trade. If you used a stock screener to pick stocks, be specific about the screens you used.

Report 3 (due 12/2; 5 pages max) 13% of final grade

Your final report should contain three main sections:

  1. Returns analysis
  • Compute the average weekly return on your portfolio and your benchmark.
  • Did you beat the benchmark you selected at the beginning of the quarter?
  • Which three securities were your biggest winners? Which three were your biggest losers? Measure winners and losers in percent, not dollars. What were the firm-, industry- or market-related events that led to the extreme performance of these six stocks? Be specific. You may include print or Internet articles that support your analysis in your appendix.
  1. Risk analysis
  • Compute the s of your portfolio’s and your benchmark’s weekly returns, as well as your portfolio’s b (using your benchmark index as “the market”).
  • On a risk-adjusted basis, did you beat your benchmark? Compute both the Sharpe ratio and Treynor measure. Which of these measures is most appropriate for evaluating your performance? (Think about what the R2 of your portfolio beta regression tells you about this last question.)
  • Compute your up-market and down-market betas. Were you good market timers or bad market timers?
  1. Conclusions
  • Conclude with a critique of your portfolio – what would you have done differently knowing what you know now? This does not mean using perfect hindsight to decide what stocks you should have purchased! Rather, suppose you were starting Stock-Trak today. Given your current knowledge of the stock market compared to earlier in the semester, what would you have do differently in terms of your portfolio strategy and your security selection process? What lessons from the game will be useful as you save for retirement?

Remember that NONE of the project grade is related to how much money you made or lost! Your grade will be based on a clear and concise discussion of what happened during the semester. Good reports will also successfully incorporate concepts highlighted in the course.

[1]TPS = Tracking the Performance of Stocks. Be sure that your reports have the right cover page.

Portfolio Management – Investment Principles and Analysis Project


The requirements of the security analysis project are the following:

1. form a team of three students for the project
2. as a team choose a stock from the attached list of companies
3. complete an analysis of the stock to determine its acceptability as an investment
4. present your formal analysis and investment recommendation to the class
5. submit the analysis and recommendation to the instructor in the form of a research paper

The basis for your team’s recommendation should be a fundamental analysis of the company and the stock as an investment. You may want to extend the analysis by including a technical analysis of your stock – charting the price, volume, indicators, and so forth. I encourage your creativity in this project. You must remain scientifically objective and not identify with or become an advocate for the company you are analyzing.

Your presentation and written report must have the following minimum content:

  1. A description of the company, its products and services, recent events that are relevant to the valuation of the company, and recent trends in sales and earnings.
  2. An analysis of current macro-economic and that are relevant to the company. You might consider discussing current monetary policy, interest rates, inflation, business cycle conditions, and any other macroeconomic subject that is relevant to value of the company you choose.
  3. An analysis of stock market conditions including recent returns on stock market indexes and average valuation ratios such as P/E ratios of stock market indexes.
  4. An analysis of the industry, i.e., degree of competition, growth of industry-wide sales, profitability of competitors, life cycle stage of the industry, Porter’s five factors, and P/E ratios of competing companies.
  5. A complete analysis of the company’s financial statements for a minimum of the most recent three years of available data including a comparison of the company’s ratios to most recent year’s peer company average ratios. Complete the ratio calculations yourself. Do not copy them from another source.
  6. A pro forma income statement analysis that includes a forecast of revenue for the coming year, major cost and expense categories, earnings, earnings per share, and dividends. Rely on your own forecast. Do not base your analysis on a sales or earnings forecast from a secondary source such as Value Line.
  7. A valuation of the stock or a range of values that would provide a basis for an investment decision. Include the assumptions you make and your calculation steps. You may calculate the stock’s required return from an SML or APT equation.
  8. An unambiguous buy or sell investment recommendation based on your analysis.

You may add content to the list above, but do not omit any of items 1 through 8 from your paper. Your team’s presentation should include relevant charts and graphs, but be sure you discuss the relevance of those exhibits in your paper if you present them. You may use Power Point for the presentation with the computer data projector.

In order to be complete, your paper must also include the following:

  1. complete citations of sources within the narrative of the paper;
  2. a complete bibliography or list of references presented in a style among those that are made available by the Coates Library at http://lib.trinity.edu/research/citing/index.shtml;
  3. a copy of the company’s most recent balance sheet and income statement from the company’s most recent annual report to shareholders.

A paper without citations is incomplete and will will receive a grade of F. If there a citiations that are missing, I will give you an opportunity to add them to your paper and grade the paper as a late submission. If you have any questions on how to cite a source, please ask me for assistance. Your word-processed, error-free paper is due in my office no later than 5:00 p.m. on the day of the presentation. Late papers will be penalized a letter grade per day. I do not accept emailed papers. The length of your paper should be about 15 double spaced pages of 12 point type exclusive of references and appendix documents.

Among your many references there must be references to the following sources: the company’s most recent annual report to stockholders, the most recent Value Line analysis of the company, S&P Industry Survey report on the industry, and an S&P Outlook report on current and expected economic conditions. Both Value Line and S&P are accessed through the library’s website.

Finally, this is a pledged assignment for all team members, and your paper must be original and not reused from any other course without my permission.

The class will evaluate the presentations including whether they agree with your recommendation. Members of the teams will evaluate each other, and I will grade the papers. A student’s grade on the project is the weighted average of the presentation grade (1/3) and the grade on the paper (2/3). Peer evaluations may be used by the instructor to adjust project grades or final grades for individuals.

Participation in this project is not optional, and the instructor reserves the right to adjust individual grades on the project to reflect participation. A student who is not a full participant in the security analysis project may be dropped from that team and given a grade of zero on the project.

Click Here to see how this project fits in to the full course.

Investments – Analysis Project

The purpose of using Stock-Trak is to give you a better understanding of portfolio management. You will also learn a variety of financial instruments and their risks and rewards in the real world. The simulation will span the semester – hardly enough time for you to demonstrate your financial prowess to your classmates. Rather, the goal is a rich learning experience.

Your Goal and Measurement

Your clients have entrusted you with $1,000,000 for a period of 10 weeks. If they are satisfied with your performance, they will extend their relationship with you. They are expecting you to invest their money wisely and profitably. While your clients crave high returns, they also enjoy sleeping at night and dislike losses. Specifically, they are concerned about the following criteria with the following weights:
• Absolute return (18%): The total dollar increase in the portfolio over the ten week period
• Risk-adjusted return (23%): The return on the portfolio taking into account the level of risk assumed by you, as measured by the Sharpe ratio
• Maximum draw down (23%): The largest dollar decrease in the portfolio from peak to trough during the ten week period
• Number of days to recover from maximum draw down to high-water mark (18%): The high-water mark is the peak value of your investment portfolio over the period
• Number of days that returns are negative (18%)
Your clients are also evaluating other portfolio managers, all of whom happen to be in the FnEc 261 class (amazing coincidence). At the end of the ten-week trial period, they plan to rank order each of the portfolio managers on the criteria above, weighted by the weights above, to determine the best portfolio manager. A ranking of 1 indicates first place. Therefore, the lowest score will identify the best portfolio manager.

Selecting Your Team

You have the choice of managing your portfolio yourself or teaming with one other classmate for the Stock-Trak experience. If you are new to investments, having a partner to help you and challenge your thinking may be beneficial. Your choice.


Date Event
1/27 Stock-Trak opens for trading
Practice trading for the next two weeks
2/92-3 pg. Philosophy, Process and Portfolio Statement Due
Competition begins, accounts reset to $1 million
4/20 Stock-Trak trading ends
4/22 3 pg. Final Stock-Trak Debrief Paper due

Practice for Two Weeks

Notice that Stock-Trak is open for trading on 1/27/10, but the competition does not begin until 2/9/10. I encourage you to use the two-week trial period to fully understand the software, try some strategies, and get a feel for the market. Your portfolio will be evaluated beginning on 2/9/10. It will be reset to $1 million on that date.

Portfolio Management Constraints

• Each position you take in an asset must be a minimum of 5% 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.
Philosophy, Process and Portfolio Statement
This 2-3 page double-spaced paper is due on 2/9/10. Ideas for a PPPS are posted on OAK under Stock-Trak. 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.
Sources of Information for Investors
Sources that you may find to be particularly valuable for your research include:
• Yahoo Finance: finance.yahoo.com
• CNBC: http://www.cnbc.com/
• Wall Street Journal: www.wsj.com
• New York Times: www.nyt.com
• Investopedia: www.investopedia.com
• Walker Management Library: Walker Management Library Research Links for Managerial Studies Students

I encourage you to e-mail Jeff Berry jeffrey.s.berry@vanderbilt.edu with questions regarding Stock-Trak and/or advice about your portfolio.

Final Stock-Trak Debrief Paper

A three-page, double-spaced paper about your Stock-Trak experience will be due at the end of the semester. Please address the following:
• Which positions exceeded your expectations? What factors created the gap?
• Which positions underperformed for you? What factors created the gap?
• What are the key things you learned from your Stock-Trak experience?
• How will your Stock-Trak experience influence your personal investing in the future?

Agriculture – Marketing Project


• Point Value: 150 points
• Groups of two or three
• Trading occurs between 09/09/13 – 11/15/13
• Reports are due by 5:00 PM on Thursday, November 21, 2013
• Responsible TA:
Anders Van Sandt will be your key contact for questions and issues relating to the StockTrak project, and how to use the website.


  1. To acquaint you with sources of market and price information available for farm products.
  2. To assist you in understanding the role and operation of agricultural commodity markets.
  3. To give you practical experience in commodity market trading.
  4. For the student to apply the concepts and tools presented in the course to identify logical chains of causes and effects determining price changes in agricultural commodity markets.


For this term project you may trade any of the futures contracts listed on the StockTrak page; however, you will have to do an analysis of your transactions, so it is recommended that you trade in commodities for which you can find information and for which you have an interest.


A. General Requirements:

You will want to approach the trading with the objective of making the greatest amount of money since this is the objective of speculators in the market. However, remember that the objective of the project is for you to learn about the role and operation of agricultural commodity markets. The focus of the evaluation of your term project will be on your analysis of the markets. Extra credit will be given out to the top five teams who make the greatest amount of money, and made at least 10 trades.

B. Specific Requirements:

1. Trade in ALL available commodities, but at least 6 trades must be in agricultural commodities. (See the “Trading Instructions” listed below to determine how to go about trading.) Your final report will include all the trades that you made during the semester.

2. Prior to entering a trade, research the commodity so you can justify why you entered into that particular trade. You will want to maintain a journal of articles used for research (WSJ, popular press articles, etc.) for the final report.

3. For each trade, present a fundamental analysis in this form: Ex ante analysis: where you explain the reasons why you made the trade. Be sure to relate national and international events that lead you to make the trade you did. Ex post analysis: explain what happened to the commodity price after you purchased/sold the contract. Did prices move in the direction you were expecting? If not, what happened? Explain.

4. Always start your fundamental analysis with verifiable facts, and appropriately reference the sources. Once you have laid out the facts, you can start explaining how you interpret them (how you expect these facts to influence prices). If you do not include at least one verifiable fact, the trade will not count. Do not reference what your uncle John has told you about the commodity markets. It does not count.

C. Written Reports:

The written report should be 5-6 pages in length (excluding title page, list of trades, any tables and/or charts, and references). The format for the written report: (double-spaced, typewritten, font size 12, margins of 1 inch, Times New Roman, Align Left):

a. Title page

b. Body of paper (please use headings)
1) Introduction
2) Trades:
The reasons why you entered into that particular trade; be sure and relate national and international events to the expected changes in prices of your futures contracts and thus to the expected profits.
3) Conclusion:
Did you make or lose money, what did you think of your experience speculating in the futures market, etc.

c. Reference page
1) Use MLA guidelines (for examples, see the following webpage: http://www.aresearchguide.com/12biblio.html

d. Appendix:
1) List of trades including:
a. commodity (i.e., December 2017 Corn)
b. dates bought and sold
c. quantity
d. prices bought and sold
e. amount gained or lost

2) Charts/Graphs (optional)


This project will be graded as follows:

a. Title page (5 points)
b. Write a summary of your trading experiences
i. Market & Economic Analysis (80 points)
ii. Grammar (20 points)
c. Reference page (25 points)
d. Appendix (20 points)


1. Your group will have a common password and account number. As instructor, I will have access to your trades and will be able to monitor your progress through the game.

2. You are required to make a minimum of ten round turns. (NOTE: This means that you must make at least five buy and five sell decisions.) The purchase or sale of two contracts of corn on a certain day is one, not two, decisions. Trade as often as you like; five is just the minimum; the more you trade, the more comfortable you will become with futures contracts. You are to close all trades by November 8th (i.e., you will offset all contracts).

3. You may start trading on September 4th and all trades must be completed by
November 8th.

4. You will have an initial capital level of $500,000 for trading. Out of this capital base you must pay commissions, post margin, and cover any losses.

5. You are not allowed to buy more capital. You may hold up to 25% of your initial endowment in any one commodity.

6. You are NOT allowed to day trade for more than half of your trades, and if you are not familiar with markets, you may not want to trade with this strategy.

7. Keep a record of all of your transactions for your personal use as you will be asked to report your trades in your written report.

Final Note:
You are free to trade in any of the futures contracts or options, and you may use limit orders, stop-loss orders, or spread orders, however, you are on your own for these. You are NOT allowed to trade STOCK, BONDS, and MUTUAL FUNDS.

Portfolio Management – Fundamental Analysis Project

The goal of this assignment is to apply the fundamental analysis tools that we have studied. We will use these tools to analyze a firm’s fundamentals and then come up with a trading strategy.

  1. First choose a publicly traded company that you would hypothetically want to analyze/track/invest in.
  2. Using a financial news website such as the following, look up the financial statements of that company. (There are other places to look; it’s your choice.)
    • http://moneycentral.msn.com/investor/invsub/results/statemnt.asp
    •  www.valueline.com (when on a campus computer)
  3. Using the Constant Perpetual Dividend Growth Model, the Residual Income Model, the P/E ratio, the P/CF ratio, and the P/S ratio, perform valuations on or predictions of the firm’s stock price.
    • For the Constant Dividend Growth Model, find current dividends per share, D(0), from the income statement. Estimate the dividend growth rate, g, or find it on the ratios/statements pages. Estimate the discount rate, k, using the CAPM. (Note: Some stocks don’t pay dividends. If that is the case, then state that and skip the dividend model.)
    • Residual Income Model: Find or estimate the EPS growth rate. Find book value per share on the balance sheet. Use the discount rate, k, from part a.
    • P/E ratio: Find or estimate the EPS growth rate. (You can use the same EPS growth rate from part b.) Predict next year’s EPS. Then predict next year’s stock price using the average P/E ratio. (Use the average P/E of the last few years.)
    • P/CF ratio: Find or estimate the CFPS growth rate. Predict next year’s CFPS. (You can use Cash From Operations on the Cash Flow Statement to approximate operating cash flow.) Then predict next year’s stock price using the average P/CF ratio. (Use the average P/CF of the last few years.)
    • P/S ratio: Find or estimate the SPS growth rate. Predict next year’s SPS. Then predict next year’s stock price using the average P/S ratio. (Use the average P/S of the last few years.)
  4. Now for the fun part! You now have as many as five different estimates for the stock value based on part 3. Compare your estimates of stock value to the current actual stock price (on Yahoo Finance or other). Make a prediction about whether the stock is underpriced or overpriced (i.e. whether you should buy it or short it).
  5. 5. Once you’ve made your prediction about the stock price direction, go to Stock-Trak and make the appropriate trade. Remember, you short sell if you think it’s overpriced (this means you think the current price is too high). You buy it if you think it’s underpriced (this means you think the current price is too low).
  6. Under “Trading”, click on “Stocks”. Enter the ticker symbol and the number of shares to trade.

Note: I’ll leave it up to you to decide how many shares to trade. That might depend on how sure you feel about your prediction. Also, remember that the transaction cost on Stock-Trak is $25 per trade, so it may take a large number of shares to overcome that cost. (Transaction fees come out of your hypothetical $1 million.)

What you are to turn in on Thursday, October 1:

Create a neat, organized report of your stock analysis & trading with the three sections as follows:

  • Section 1: Include your name, the assignment (Stock Trak #1), and a typed concise description of your analysis. Include why you picked the stock, and your conclusions on whether the stock is overvalued or undervalued. Do the results of your calculations agree with other current information that you may know about the company?
  • Section 2: Neat, organized, legible calculations for steps 3a, 3b, 3c, 3d, and 3e. This page(s) can be hand written or typed. Clearly show your five stock price predictions compared to the market price.
  • Section 3: A printout of either your Stock-Trak Confirmation page or Transaction History. If you include Transaction History, circle the trade that corresponds with this assignment.

Extra Credit (Optional)

Any time after you make your initial trade, but before December 11, reverse your trade on Stock-Trak when and if the stock price moves in the direction you predicted. If you can show me that you made a profit (net of transaction costs), I’ll give you 5 extra credit points on the final exam. Thus, there is incentive here to try to make quality valuations/predictions.

In order to receive extra credit, you must:

a. Print out the “Transaction History: View All” page
b. Circle the initial trade and the reverse trade
c. Show through neat, legible calculations that you made a positive profit (net of transaction costs).

This extra credit portion can be turned in anytime before the final exam, but you must make your final trade by December 11. That is the day our Stock-Trak subscription expires.

Portfolio Management – Technical Analysis Project

1. Using at least 3 technical analysis tools, identify one stock to either buy or short sell. You must print out whatever charting you finally use. I recommend: www.bigcharts.com or www.stockcharts.com

2. Type a few coherent sentences explaining your choice of strategy and reasoning from these 3+ techniques (technical analysis).

3. As soon as you have picked your winner (or loser), go to Stock-Trak and make the trade. You choose how many shares to trade. Print out your confirmation page.

Charts, Summaries, and Confirmation printouts are due on Tuesday, October 13.

Extra Credit (Optional):

Any time after you turn in this assignment but before December 11, reverse your trade on Stock-Trak when/if the stock price moves in the direction you predicted.

If you can show me that you made a profit (net of transaction costs), I’ll give you 5 extra credit points on the final exam. Thus, there is incentive here to try to make good predictions. You will have to print out the Transaction History of your reverse trade and your original trade, and show me through calculations that you made a profit (net of transaction costs).

Investments – Bond Analysis And Trading Project

• For this assignment, you will be analyzing a U.S. Treasury coupon bond and purchasing it on Stock-Trak.
• Stock Trak trades only a very limited number of bonds. To trade bonds, you click on “Bonds” under “Trading” on the lower left of the screen. In the trading window, under “Symbol”, you will find a selection of traded bonds. Treasuries are listed below the Corporates.
• You will select a Treasury bond based on the following formula: Bond Maturity Year = 2020 + (last digit of your student ID number). Select the Treasury bond that has a maturity closest to the formula result.
• Once you have selected your Treasury bond, you must calculate or estimate the following:
1. Estimate the YTM of the bond by linear interpolation of the current Treasury yield curve. http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml

2. Calculate the current bond Present Value (or Price). (You can use either your financial calculator, or Excel’s PV function, or Excel’s PRICE function. You may have to install all of the “Add-ins” on Excel to get the PRICE function to work. Look under “Tools” and then “Add-ins”.)

3. Calculate the bond’s Macaulay Duration. (You can use the formula in the book or Excel’s DURATION function. This will also require the “Add-ins”.)

4. Calculate how many bonds you need to purchase in order make a $50,000 purchase. Round off to the closest whole number.

• Next, go buy your selected bond in the quantity that you calculated in part 4 above.

What to turn in:

(1) Calculations and circled answers for parts 1 through 4.

(2) Confirmation page or Transaction History that shows the bond purchase in the appropriate quantity.