1) Each position (buy) you take in an asset must
be a minimum of 5% and a maximum of 10% of your total
portfolio assets.
(2) Cash must NOT exceed 20% of your portfolio at
any time. You MUST be investing, not sitting on the sidelines.
By
the end of Week One, your client (me) MUST have a 2-3 page double-spaced paper
explaining your philosophy, process, and the initial positions and allocations
you have chosen for your portfolio (portfolio statement), following the two
rules above.
Here are your portfolio options that I
have set up for you:
Starting
balance for players:
$2,500,000.00
Commission:
$10.00
Credit
Interest Rate:
3.00%
Leverage
Debt Interest Rate:
6.00%
Minimum
Stock Price:
$2.00
Maximum
Stock Price:
$500,000.00
Trading
Volume Limit:
1.00%
Short
Selling:
Enabled
Margin
Trading:
Enabled
The final project will be due no
later than midnight on the final day of class and is worth 200 points. Your
paper and portfolio will be measured on the following three elements by your
client (me, again):
(1) Absolute return – the total dollar amount that
your portfolio increased over the trading period and
(2) Risk-adjusted return – the return on the portfolio
taking into account the level of risk you assumed as measured by the Sharpe
Ratio.
(3) A 3-4 page, double-spaced paper about your
experience with this game that addresses at least the following questions:
a) Which positions
exceeded your expectations and what conditions caused this?
b) Which positions
underperformed for you and what factors created the performance gap?
c) What were the key
things you learned from your Virtual Stock Exchange simulation and how will it
influence your personal investing in the future?