FIN 430 Research Project Segment 3: Portfolio Performance Measurement

Summer 2021

FIN 430 Research Project Segment 3: Portfolio Performance Measurement

Objectives:

You are anticipated to evaluate your stock portfolio from the MarketWatch Stock Trading Game.

To-do list

1. Download the daily returns of your MarketWatch simulated portfolio. ? Go to https://www.marketwatch.com/game/fin430-summer2021 ? Click Portfolio in the main navigation bar. ? Click the Download by Portfolio Performance.

2. Download the daily returns of S&P 500 Index. ? Go to https://www.marketwatch.com/investing/index/spx ? Click Historical Quotes. ? Set Start Date and End Date the same as the first and last date of your

portfolio. ? Make sure that the Result Frequency is Daily. ? Click Update Results and download. ? Calculate the daily returns of S&P 500 using the Close price.

3. Evaluate the performance of your MarketWatch portfolio. ? All the performance measures should be calculated based on daily returns of the

portfolios. ? Use performance metrics include but are not limited to Sharpe ratio, M-square,

Treynor measure, Alpha, and Information ratio. ? See Appendix 1 for step-by-step instruction.

4. Repeat the Step 1 to download the portfolio returns of one other student and compare you portfolio performance with him/her. ? Conduct the comparison analysis and make investment recommendations.

5. Write a report summarizing your findings. ? See Appendix 2 for the instructions of the final report.

https://www.marketwatch.com/game/fin430-summer2021
https://www.marketwatch.com/investing/index/spx
Summer 2021

Appendix 1 Evaluate portfolio performance.

1. Daily risk-free rate can be collected from https://fred.stlouisfed.org/series/DTB3. Set frequency as daily. Divide the downloaded T-bill rate by 36,500 because the rate is annualized and is only the numerator part of the percentage.

2. Calculate the performance metrics and show them in a table like the following: Avg.

Return Ave.

Excess Return

St. Dev. ? Sharpe ratio

Treynor ratio

Alpha M2 Information ratio

Your Portfolio

Peer Student Portfolio

S&P 500 1.00 n/a n/a n/a

3. Discuss the performance metrics, emphasizing on comparing your portfolio and your peer students portfolio.

Appendix 2 Recommended Report Outline and Rubric.

Part 1. Introduction

Briefly summarize your trading strategy for the MarketWatch Stock Trading Game.

Part 2. Investment Opportunities

Plot the cumulative growth of your portfolio, your peer students portfolio, and S&P 500 Portfolio. S&P 500 Portfolio will be hypothetical portfolio that starts with $100,000 and has been invested in S&P 500 index. You will need the daily return of S&P 500 index to calculate the growth.

Part 3. Performance and Recommendations.

Tabulate the performance metrics. Discuss the performance and make investment recommendations.

Part 4. Summary.

Summarize your MarketWatch Stock Trading Game.

Rubric: for each part, I will grade based on the following part criteria: completeness 5pt, informativeness 5pt, comprehensiveness 5pt, language 5pt. The highest grade will be 20 pts.

https://fred.stlouisfed.org/series/

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