Posted: April 28th, 2015

Stock-trakb Final Report

Stock-trakFinal Report: Due Tuesday, April 28. Email me this & print a copy for me

Your group presentation and final report are due (CHANGE: max 4 pages at “1.5” space). Show any tables or figures relevant to your results or strategy in an appendix at the end (additional 2-3 pages) and refer to them in the main text (e.g., “See Table 2 in the appendix”). Touch on the following(Note: this font is Arial 11):

• Summarize your philosophy and benchmark; explain briefly if you made changes to either during the semester.
• How did your portfolio perform relative to your benchmark? Calculate and briefly compare annualized returns, std deviation, Sharpe ratio, maximum drawdown,CHANGE: number of weeks (and percent of total weeks) that returns are negative. Show this table in an appendix.
• Which positions exceeded your expectations (only most important ones. 2-3 most important)? What analysis or what relation to your philosophy led you to include that security or position in your portfolio? What factors (ex-post) created the gap vs. your expectations?
• Which positions underperformed (most important ones. 2-3 most important)? Answer the questions as above
• Briefly, what are the key things you learned from your Stock-Trak experience?

ADDITIONAL POINTERS

Report

Form:

• Neat, clean style. Imagine you are briefing your supervisor and colleagues on your monthly performance (not a formal annual report to the C-suite, yet has to be careful and professional).
• Use Arial 11 or Times New Roman 12 font, to standardize size for all (Note: this font is Times New Roman 12, look at original paragraph above for Arial 11).
• How reasonable it is to read and follow your report and to find the information in the appendix (that you mention in the text) will be reflected in the grade for the report. Although content is the most important, form (clarity, style, spelling) is important too.

Portfolio: If you are in a group, you may choose which portfolio (out of the 2) you analyze and write the report about.Please discuss only 2-3 best trades and 2-3 worst trades apart from general portfolio results and statistics requested.Note: A group with 3 students has to discuss 2 of the 3 portfolios and present both portfolios.

Portfolio statistics:

• You may report the stats that stock-trak presents, but compute your own to verify. Maximum drawdown = maximum percent loss suffered by the portfolio in the semester (accumulate your weekly returns: start from zero and add the return of the first week, then week 2, etc to the end. Plot that and find the peak and trough of the cumulative returns. The difference between peak and trough is the maximum drawdown of the portfolio). You don’t need to show me the plot, give me the stat.
• You may try to recompute the returns of your portfolio without the options (or short sales): get the weekly returns of your portfolio rP and of the options rO, get the weights of the options wO in the portfolio. The contribution of the options return to the portfolio in each week is the product wO*rO: subtract this from the portfolio return that week, then rescale the resulting return by 1/(1-wO).
• g. if the options were 5% of the portfolio and lost 20%, and your total portfolio return was reported as 10% that week. The adjusted return steps are: 0.10 – (0.05*(-0.20)) = 0.10+ 0.01=0.11. This 11% is not the final number because its weight is 95% (I took 5% of the return, from the options, from the total portfolio return, so now I have to adjust it to 100%): 0.11/0.95 = 0.1158, or 11.58%. Test: If you calculate back and include the options with 5% weight (and the 0.1158 number with 95% weight) you get back the total return of the portfolio at 10% that week. So your portfolio stripped of options returned 11.58% that week. Repeat for weeks where you had options open.

Discussion topics (potential, not required but this idea or similar you come up with will add value to your report –bonus points are possible):

• You may want to find the beta of your stocks (e.g. yahoo finance) and the S&P 500 average return during this period and find the contribution of market risk to your stock returns, the rest being compensation for idiosyncratic risk.
• You may try to find good or bad news for your stocks during this period, which could explain your stock idiosyncratic return. If not, that return may be due to small firm size, low P/E, high Book/Market price or some other factor. You may try to find about these factorsfor your stocks during the period you had them. Discuss briefly and to the point. You may add a table in the appendix and spend only a few lines in the main text.

Tables, figures and appendices

• Only as necessary.
• Please don’t put a table with 40 lines of info you find online if you only use 2-3 lines (e.g. you want to show beta and P/E from yahoo finance and the table there shows 25 variables for the stock). Crop the table to show only what you refer to in the main text. Better yet, if you want to show the beta and P/E ratios of 6 stocks or assets in general (3 good, 3 bad), a small table with all the betas and P/E’s would be better than 6 gigantic tables, one per stock, with irrelevant information except for two lines.

Presentation

• Prepare a short presentation (4-5 minutes) to the class. Imagine this is a monthly presentation to highlight your ideas and results to your boss and colleagues in an investment company. So it should be careful and professional, but more relaxed than a presentation to the C-suite (chief executives) or major clients or shareholders.
• We will do presentations during the second half of class on Tuesday, April 28. Other groups will have the chance to ask questions (to keep it on time, we’ll allow 2-3 questions total asked to each group).
• Thegroup of 3 people: Write a report for 2 of the 3 portfolios, and present those 2 portfolios: you’ll have about 10 minutes (and may be asked 2-3 questions per portfolio).