Stock Market Game

Portfolio Simulation Game and Performance Report

(Maximum marks-50)
The goal will be to beat a passive Rs One Million benchmark portfolio comprising of
50% of the market index, 40% long term government bonds(more than 5 year) and 10%
cash. Students will apply the concepts learned in the course to select which bonds and
stocks to buy and which to sell, and to evaluate the relative performance of the portfolio.

Each student will participate in a portfolio simulation exercise managing Rs One Million.

You can invest in any exchange NSE, BSE, a series of government and corporate bonds

Investment teams can buy on margin and sell securities short. The requirements for this
component of the grade are:

1. Prepare a Fund Prospectus. This statement should be in the form of a one-page,

brochure or one-page "specification sheet." It should describe the investment
style, restrictions on certain asset classes, name (or names) of investment manager
(or managers), benchmark index for performance assessment, expected turnover
activity and anything else a potential investor might expect. .You may change
your portfolio as often as you wish, but every transaction costs money
(incorporate charges as per charges schedule of www.icicidirect.com).You should
remain fully invested. Make sure to invest at least in 10 stocks and atleast 40% of
your portfolio in a single asset class. Keep track of your portfolio's performance at
least twice a week.
A note on bonds
If you want to invest a certain amount in particular bonds, you need to know the
price.
2. Each individual will prepare a final performance report that (1) tracks the week-
to-week performance of their portfolio, (2) analyzes the macroeconomic, financial
market and stock-specific news events that may have affected the risk and return
performance of their portfolios, and (3) evaluates statistically their relative and
absolute performance using various tools and techniques.
Report: Use of a spreadsheet program such as Excel is recommended. Among
other things, the final report should contain:

1.For each security,

 price level and change (performance) for the time period between
February 25,2009 and March 24,2009
 a measure of historical return. At least monthly return of last 2
years.
 a measure of the security's risk
 2.For the whole portfolio, your goal is risk analysis and performance
analysis:
 Estimate the degree of diversification of your portfolio, using the
tools of portfolio diversification.
 Find the portfolio beta
 Find the portfolio expected return, using the T-bill rate as the risk-
free rate and the market return
 Measure the portfolio's excess return: the difference between the
actual and the expected.
 Measure performance relative to the benchmark portfolio
 Use the Sharpe and Treynor measures. You'll need the beta,
average return and standard deviation of your portfolio and of the
benchmark.

Note that your grade is not only related to the investment performance, but on the quality
of the analysis. The report will be no more than ten pages long (double-spaced, single-
sided, 1-inch margin), not including various exhibits, figures and graphs to support the
analysis (maximum 20 pages). Please do not hand in reams of computer output. Factors
such as clarity and conciseness will be considered heavily in grading your work. In
particular, explain carefully any technical material that you used. Always give a bottom
line to your findings.

IMPORTANT RULES AND REGULATIONS

1. Current and Real-time prices of bonds and stocks need to be considered for
your portfolio. Data limitations should be discussed before being made an
inclusive part of the course.
2. The final report is to be submitted in hard copy form on March 25,
2009.There would be a viva on submission.
3. The weekly updated portfolio has to be sent to the instructor latest by every
Saturday, starting from this week and failure to do the same will lead to
penalty of marks.
4. More than two late or non-submissions of weekly reports will lead to your
final report not being evaluated at all.
5. Copied portfolios and reports will not be evaluated.