Sharemarket Game and Managed Portfolio Report (25%)
2The goal of this syndicate assignment is to help you get a better understanding of the investment process and, importantly, a better understanding of your attitudes towards return and risk in the context of share market investing. The vehicle for this assignment is the ASX Public Sharemarket Game run by the Australian Stock Exchange (ref: www.asx.com.au). The basic details are as Follows:
§ Each syndicate has $50,000 to invest; no more than $12,499 can be invested initially in any one share;
§ Syndicates can buy and sell shares “online” in 100 ASX listed companies, at a cost of $50 per trade;
§ Syndicates can place orders to buy or sell shares any time. Orders will be executed when the real sharemarket is open;
§ “At market” orders will be filled using the next available price in the real sharemarket. You can also place “at limit” orders (where you set the price);
§ Our trading period will be from Thursday 3 August to Thursday 5 October.
Portfolio Investment Strategy
A common investment strategy has been adopted (i.e.imposed) for all syndicates. The investment strategy is to generate reasonable short-term growth in the value of the portfolio over the trading period, but with moderate risk.
Portfolio Trading Activity
A simple buy-and-hold is not permissible (but see point 3 below): As the objective of the assignment is to enable you to get a better understanding of your attitudes to return and risk and your trading behaviour, you need to buy and sell shares during the course of the game. Accordingly, a minimum of 10 trades is required.
Each syndicate is to prepare a report reflecting upon their trading activities and performance over the period. Your discussion and analysis in the report should consider the total return on the portfolio, risk characteristics and key market-wide or industry or firm-specific events that influenced trading decisions and subsequent results. A brief chronicle of major events with their associated impact on trading decisions, presented as an appendix, should be quite useful (I strongly recommend keeping a journal during the game in order to make this easy to pull together for the final report). Calculations of performance measures can usually be summarized in several tables and graphs, which should also be appended. The report should also include information on, but not necessarily limited to:
The initial sector weightings of the portfolio and the rationale for that composition, and the final sector weightings;
A summary of trading activity during the game, including brief reasons for trades;
A comparison of the return expected on the portfolio (using the weighted Beta of the portfolio) and the actual return achieved;
An overall evaluation of the performance of the portfolio, including Sharpe Ratio etc.;
Reflections on your experience of participating in the trading game
An important goal of this assignment is to give you a (costless) insight in to your trading behaviour. Accordingly, the reflection component of the report is quite important: we want to know what you learnt from this exercise.
Three important points to note:
1. While you are required to provide a rationale for the composition of your portfolio, you are not required to undertake a detailed valuation of the individual shares selected; and
2. None of your mark is related to how much money your portfolio made or lost.
3. You should use the Watchlist feature provided on the ASX website. You are to set up two identical watchlists showing your initial portfolio composition. One of the watchlists can be used as a benchmark against which your trading activity can be compared.
Details of the game can be found by selecting the Investor Education icon at the top of the ASX Homepage and then going to ASX Games on the pull-down menu.
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