1. Introduction (3-4 pages)
You have to mention the followings:
Purpose of this project.
How this project make you understand the stock investment.
Explain the high P/E stocks, the low P/E stocks, the growth stocks, and the value stocks.
What was your initial pick and why you chose them for each of the four portfolios.
How your four portfolios have performed for three weeks IN GENERAL.
Based upon the results of your four portfolios, which factors you think are more important in the stock market investment, firm-specific factors, macroeconomic factors, and/or speculative expectation, etc.
2. Company information and Weekly Performance (5 – 7 pgs: do not include spread sheets)
A. Week 1 Companies for Four Portfolios
Provide basic information of the companies and explain why you selected those four companies for your four portfolios. Provide some financial ratios or news to justify your selection, with some table or plots, if any.
B. Week 1 Performance of Four Portfolios
Explain how those stocks performed during the first week. Was their performance consistent with what you expected from the beginning of the week? If it was not or it was, explain why. Try to find both macroeconomic factors or firm-specific factors (or news) to cause the results.
C. Week 2 Performance
Explain why you changed the stocks giving specific information. Then, describe and explain how your Week 2 portfolio performed during the first week. Was their performance consistent with what you expected from the beginning of the week? If it was not or it was, explain why. Try to find both macroeconomic factors or firm-specific factors (or news) to cause the results.
D. Week 3 Performance
Explain why you changed the stocks giving specific information. Then, describe and explain how your Week 3 portfolio performed during the first week. Was their performance consistent with what you expected from the beginning of the week? If it was not or it was, explain why. Try to find both macroeconomic factors or firm-specific factors (or news) to cause the results.
E. Overall Evaluation on the Three Weeks Performance of Four Portfolios
GO TO Sheet 5 of your excel file, get 14 observations of portfolio returns for each of your four portfolios. Also, get the S&P500 returns from the Blackboard. First, provide the table of mean, variance, STDV, and CV of your four portfolio returns and S&P500 returns. Also, provide the plot of the five return series. Then, compare them in terms of risk-return relation. Second, using the three measures of portfolio performance (Treynor’s measure, Sharpe’s ratio, and Jensen’s alpha), compare and explain overall performance of your four portfolios. For each portfolio, was your portfolio performance affected relatively more by economic factors or by firm-specific factors? Is there any significant difference in performance among the different portfolios? If any, which portfolio is the best and worst? Explain it.
You make a summary of your report with important facts that you have observed. Is there any important knowledge or lessons that you have learned from this project? Finally, make your own argument as the conclusion of your project.
Here, you attach all Excel Spread Sheets
Three measures of portfolio performance:
A. Treynor’s measure = PfPBetaRr− , where )(),(MMPPrVARrrCOVBeta=
B. Sharpe’s ratio = PfPSTDVRr−
C. Jensen’s alpha = MPrr−,
where Pr is portfolio returns and Mr is market returns (S&P500 returns).
Also, use %0=fR.
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