INVE3001 Portfolio Management 2024

Trading Game Assignment (40%)

This assignment requires students to form. groups and use the software“StockTrak”to invest in the Australian and/or U.S.share  market. You may also invest in cryptocurrencies,but this is not compulsory.Students are expected to finish a comprehensive report based on your investment strategy and performance.

Your team will be given A$350,000 (it's not real money)to create an investment portfolio. Your goal is to (at least)match,and hopefully outperform. a market index(e.g.NYSE/ NASDAQ Composite,ASX,All Ordinaries). Please note that you will not be penalised should you fail to achieve your goal;marks are awarded based on your discussion in the report. A critical part of the report will be your understanding of why your portfolio performed as it did (a marking guide is available in the folder).

You will need to monitor the performance of your shares on a daily basis.

At the end of the game,you will be required to present a report:

1. Outline your initial strategy and discuss how,and why,it changed (ifit did).

2. Discussing the performance of yourportfolio using metrics such as the Sharpe ratio and Jensen's alpha.

3. Using metrics such as the Sharpe ratio and Jensen's alpha, you will compare the performance of your portfolio with the benchmark index.

4. Discuss the influences (both good and bad)on your portfolio's performance.These influences can include both global and national news (e.g.,wars)and major economic events and factors affecting individual companies.Factors affecting the entire market can be considered as systematic while things affecting individual companies are idiosyncratic.

5. Reflect on the Efficient Markets Hypothesis in light of your experience in managing your portfolio and behaviouralbias.

The assignment will be marked using a scale adding to 40 and the marks will be awarded for:

i. Calculation of performance metrics for your portfolio, the market index and a discussion of any differences in their performance     8

ii. Understanding of market wide (i.e. systematic) influences on your portfolio.                        8

iii. Understanding of idiosyncratic influences on the stocks held in your portfolio.                      8

iv. Mature reflection of the EMH taking into account the evidence provided during the investment exercise, and behavioural considerations.                                8

v. Discussion of your initial strategy. Clear and concise expression and use of graphs, tables and sources.                 8

The report should be no more than 10 pages (not including graphs and tables).You may use:

·Times New Roman or Calibri (size 12);

·1.5 line spacing;

·APA or Chicago referencing accurately;

·A4  paper.

You will also be required to attach your trading screen shots from the software“StockTrak”to your 10 page report (that is,trading screen shots do not count toward the page limit)for audit purposes (see below).I list the penalties for not abiding to these restrictions later in this document.

Please note that:

·A soft copy of the report and excel workings should be submitted via Turnitin link on blackboard.

·Each team only needs one submission.

·Don't use ChatGPT or other AI to write the report:Turnitin could easily identify it and your results wll be treated as academic misconduct.

Teams

The assignment may be attempted in groups of up to three students (no more).I suggest that it's best to choose people you know well and think you can work with for a long period of time. Each team will have a StockTrak account,which allows you to do the trading.Each team should also select a group leader,who will be responsible for group communication,doing trading online after group discussion,and report to me if there are any free-riders.

Rules

Getting Started

·You must establish your portfolio before Wednesday the 17h of July

·Each trade must be carried out using the software StockTrak

Iaccept that you will want tokeep your money in the bankin times offinancial turmoil in real life.This option doesn't exist in the Assignment.

● You may only trade during opening hours of ASX,NASDAQ and/or NYSE.

·You can invest in odd amounts of shares-don'tworryabout rounding up or down.For example,you can invest in 101 shares rather than 100.

● Dividends are ignored but remember that prices fall when the stock goes ex dividend.

● Although buy and hold could be a trading strategy,in this assignment you are required to actively trade in the market.So you will have to trade at least once a week.

·You could buy,sell,short,cover any shares you want.You could also use limit or stop orders if you want.

Make sure you keep a record of the main reasons for trading by yourself.Given the importance we're placing on thinking about why you're trading,we want you to record your reasons for this trade and the information you'reusing.The reason can be anything: information,feelings,a  whim...A  good  investor,however, should have  some idea of why trading. You should also record any information source you're using (articles, news...);remember that the EMH has lots to say about investors'use of information.

These things are important as you'll see when we get to the marking guide.

Below are some helpful links and videos about how to use StockTrak and finish the trading:

https://content.stocktrak.com/student-fag-technical-support/

https://content.stocktrak.com/stocktrak-student-user-guide/

http://www.youtube.com/watch?v=LUD8XZa rlM

http://www.youtube.com/watch?v=EiO0n6LER7E

http://www.youtube.com/watch?v=9M5NTAK3pUY

http://www.youtube.com/watch?v=Et5nJdmK8Vg&t=15s

Finishing up and submission

·Closing prices  on  Friday 16h of August will determine the closing value of the stocks in

your portfolio.

● The report and excel workings need to be submitted on Sunday 1st of September at 11:59pm  AWST

·    Free  riders  will  be penalised.The free rider is determined by the group members.Say we have a three-student group,and if two out of three students send me emails saying the third student is a free rider,I will then apply the penalty.

The Risk-free rate

You will need to know how to find the risk-free rate during your lectures

Referencing

Use APA or Chicago referencing

Advice

Sadly,this is a project you'll need to be working on for most of the trimester/semester.Such is life as an investor.

You'll need to be working on this assignment every day to monitor the value of your shares and work out if any events are affecting them.You'll have to read the papers and watch the news.Even though the report is short,there's going to be a lot of work behind it.Try and enjoy,as well as learn from,this project.This is what investment is all about.