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(Prospectus and Performance Report account for 20% of the final grade for the semester)

(Begin date: Aug. 31-Monday; End date: Nov. 23-Monday)

Your class ULL-FNAN505-FALL2015 has been registered by me at StockTrak.com. You need to individually Register to participate in the simulation game. After registering online, read trading rules, FAQs, and then acquaint yourself with Help Desk. Each portfolio must be active no later thanTuesday, Sept. 8. In order to be considered active, a minimum of 10 stocks (100 shares each), which have a five year monthly closing price data available from Yahoo at http://quote.yahoo.com/ should be bought. Accounts that are not active by the close on Sept. 9, will be penalized 1% per trading day until they have reached the minimum number of ten stock transactions (maximum penalty for late trading is 5%).

Stock-Trak Portfolio Simulation Game and Performance Report.

The goal will be to beat a passive $100,000 benchmark portfolio comprised of 50% U.S. equities (an "index fund"), 40% long term government bonds, and 10% cash (short term money market instruments). At the end of the semester, students will be able to apply the concepts learned in the course to select which bonds, stocks or mutual funds to buy and which to sell, and to evaluate the relative performance of the portfolio. Each student (or investment team) will participate in a portfolio simulation exercise managing $100,000 over the semester. The simulation is professionally-managed by Stock-Trak Portfolio Simulations based in Atlanta, GA (www.stocktrak.com). Each team can invest in any NYSE, Nasdaq-AMEX stock (with traded price over $5), a series of government and corporate bonds, a selection of over 2000 mutual funds and certain stocks trading on stock exchanges around the world, including London, Paris, Frankfurt, Brazil, Mexico City and India. To manage your risk exposures, your investment team can also invest in various options and futures contracts. Review your account activity, class rank as well as background resources for researching stocks, with price quotes and charts. Investment teams can buy on margin and sell securities short. The requirements for this component of the grade are:

Prepare a $100,000 Fund Prospectus. This statement should be in the form of a one-page, brochure or one-page "specification sheet." It should describe the investment objective, investment style, top holdings, top sectors, restrictions on certain asset classes, name (or names) of investment manager (or managers), benchmark index for performance assessment, fees & expenses, principal risks of investing in this fund, expected turnover activity and anything else a potential investor might expect, such as whether the fund is tax-friendly. Study a few prospectuses of mutual funds available online. This prospectus is worth 5% of the 20% allocated to this component of the final grade. It is due to me by September 21. You may change your portfolio as often as you wish, but every transaction costs money. Changes must be made through Stock-Trak. You should remain fully invested. Make sure to invest at least in 10 stocks (which have 5-yrs. of monthly data in Yahoo). We are going to do some analysis of these ten stocks. Keep track of your portfolio's performance on a weekly basis. Don't know where to start? Look at morningstar.com or lipperweb.com for some top-performing funds andfool.com for stock ideas.
- A note on bonds
1. If you want to invest a certain dollar amount in particular bonds, you need to know the price. Stocktrak tells you which bonds are available for purchase on its "read the rules" section. You can find bond price quotes at bondsonline.com. This site enables you to quickly enter criteria (such as maturity in years for Treasurys, or the company's name for corporates) and get a price.
  1. Online Investment Help
  - Try the following Web sites:
  - CNN Finance The Financial Times The Economist Bloomberg Reuters The Motley Fool Microsoft Investor Dailystocks
  - and much more at Rao's Finance Resources on the Web
At the end of the semester, each team will prepare a final performance report that (1) tracks the week-to-week performance of their portfolio (summarizing trades-purchases and sales) with an explanation of trading philosophy, (2) analyzes the macroeconomic, financial market and stock-specific news events that may have affected the risk and return performance of their portfolios (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), and (3) evaluates statistically their relative and absolute performance using various tools and techniques.
Report: Use of a spreadsheet program such as Excel is highly recommended. Among other things, report should contain:
1. For Equity portion of the portfolio, for each security,
  - price level and change (performance)
  - a measure of historical return. I suggest 5 years.
  - a measure of the security's risk -- if possible, the standard deviation of returns. I suggest 5 years of monthly data. You can obtain data from the Microsoft Investor site, http://investor.msn.com/research/welcome.asp (use "charts" to download data) or from Yahoo at http://quote.yahoo.com/
  - the betas of each security
2. For Equity portfolio, your goal is risk analysis and perfomance analysis:
  - Estimate the degree of diversification of your portfolio, using the tools of portfolio diversification. You also can obtain sector performance results from the various sector indexes at bigcharts.com
  - Find the portfolio beta
  - Find the portfolio expected return, using the T-bill rate as the risk-free rate and 12% as the market return
  - Measure the portfolio's excess return: the difference between the actual and the expected.
  - Measure performance relative to the benchmark portfolio
  - Use the Sharpe, Treynor and Jensen measures. You'll need the beta, average return and standard deviation of your portfolio and of the benchmark. For a sample see the spreadsheet, benchmark.xls
3. For the entire $100,000 portfolio
  - Conduct a performance attribution analysis (see relevant chapter in textbook)
    1. contribution of asset allocation to performance
    2. contribution of stock selection and bond selection to performance
  - Note: you can get charts and downloadable data on the benchmark components (FUSEX and VUSTX) at quote.yahoo.com/

Note that your grade is not related to the investment performance, but rather the quality of the analysis. The report will be no more than ten pages long (double-spaced, single-sided, 1-inch margin), not including various exhibits, figures and graphs to support the analysis (maximum 20 pages). Please do not hand in reams of computer output. Instead insure that the output that you chose to include is carefully edited to allow the reader to identify quickly your analysis and conclusions. Factors such as clarity and conciseness will be considered heavily in grading your work. In particular, explain carefully any technical material that you used. Always give a bottom line to your findings. Enclose a diskette with files in Word 2010 and Excel 2010 showing all your work neatly organized and documented. Make sure to add a footer containing your name to your Word and Excel files. The report is due on or before November 30, by 6 p.m. This report is worth 15% of the 20% component allocated toward the final grade. Penalties for turning in the paper late will be (the number of days late) times 2%, e.g., three days late would be a penalty of 3 times 2 = 6%. The penalty will be subtracted after the project/paper is graded on a normal basis. Do not start your search or paper late.

your accounts are activated on August 31 with $100,000.

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