Business Economics 271
Prof. John W. Sell
PORTFOLIO PROJECT
Description
| Paper
Format
This project is an opportunity for
you to
test our classroom theories empirically. It should begin this week. You are to construct a hypothetical
portfolio, keep
track of its value for the semester, and evaluate its performance. How
your
portfolio actually performs is irrelevant to your grade, but how you
evaluate
it counts 20%. Papers are due in class on Thursday December 7,
2006 and are to be
typewritten (word processed)
and double
spaced. Projects submitted late will receive a grade of zero. You are
expected to do this project independently without outside help from
others.
Instructions:
1. Choose a portfolio of any dollar amount containing ten different
securities
consisting of at least two common stocks from each of the three major
exchanges
(NYSE, ASE, NASDAQ) and at least two corporate bonds. Make round-lot
purchases
only.
2. Use Excel to record the price of
each security at Friday's closing prices (listed in Saturday's Wall
Street Journal) for
this and the next fourteen weeks. Also record the closing value of the
Russell 3000 market index for each week. On a weekly basis, compute the total value of the portfolio
and the
rate of return on both the portfolio and the market index. You will
have
fifteen values and fourteen rates of return for each. You may buy and
sell
securities, but the proportions listed above must be maintained. The
market
value of new securities purchased cannot exceed the proceeds from the
securities sold. Any cash
balances
are assumed to earn the T-bill rate of interest.
3. When your data are complete,
compute:
4. Briefly answer the following
questions:
The text (except as indicated below)
should
by typewritten and double spaced. Calculations and spreadsheet working
papers
sufficient to support your conclusions must be included in an organized
and
comprehensible form, but need not be typed. The format of your paper
should be
as follows:
I. Cover Page
Place your name and the date at the
top of
the front page of your report. Below this, single spaced, list the
names of the
securities included in your portfolio at the present time, the
exchanges on
which they can be found, and the number of shares held of each. After
these,
list the names of any securities that you previously held, the number
of
shares, and the date they were sold.
You should also list on this page the
summary
statistics for your portfolio and for the market. Include the mean
weekly
return, the standard deviation of these returns, the portfolio alpha
and beta,
and the Sharpe, Treynor, and Jensen measures of your portfolio's
performance.
(Remember to use the riskless rate of interest found at the beginning
of the
course, and to divide this annual rate by 52 in order to get the weekly
rate
consistent with the rest of your data.)
II. Analysis Pages
The analysis of your portfolio
follows the
cover page. This would include, but is not limited to, answering the
questions
from Part 4 of the portfolio project description distributed at the
beginning
of the course. Be sure to include here a graph of your portfolio's
characteristic line.
III. Supporting Documents
Computations and the spreadsheet
reports
necessary to support your statistics and analysis should be included at
the end
of the paper. These should be legible and arranged in an orderly
fashion.
Revised 15 August 2006 by Jws.