FIN 470 Portfolio Analysis & Risk Management for Securities Market

I. Purposes of the Project: How to Build a Portfolio and How to Analyze a Market

The purposes of the project are to develop the student’s knowledge, skills and ability in the processes of designing, building, and managing portfolios of securities by:

  • Having the student acquire an in- depth knowledge and understanding of one particular securities market.
  • Providing the student valuable, relevant, knowledge – building experiences in identifying, locating, organizing, analyzing, assessing and evaluating data and information on securities markets.
  • Develop the student’s knowledge and skills in and understanding of:
  • Measuring return, risk, and distribution characteristics of a securities market.
  • Identifying, analyzing, and evaluating the inter-relationships among securities markets returns.
  • Assessing the usefulness of an asset class in enhancing portfolio return and diversifying portfolio risk;
  • The pricing efficiency of the market represented by the asset class;
  • The valuation of the market represented by the asset class.
  • Using statistical tools to evaluate a range of characteristics of securities markets.
  • Using Excel and other statistical software.
  • Writing precise, concise, clear and informative reports and making clear, concise and informative oral presentations.

The project is a series of related assignments. The assignments are straightforward, and except for assignments 3 and 4 are not time intensive. Basically, each assignment replicates an activity a portfolio manager does in building a portfolio for a client.

The typical assignment requires some measurements, followed by analysis, assessment, evaluation, reflection, and a little writing. A few of the assignments will require the student to workcollaboratively with all other students in the class.

An overview of the Course Project assignments is as follows:

Assignment Point Value Assignment Summary

1 20 Update and research market index data.

2 20 Presentation on market index.

3 30 Calculation, analysis, evaluation of market returns, risks, distribution.

4 40 Build markets data base with allclassmates; and comparative evaluation of markets.

5 30 Measure & analyze interrelationships of market returns & risks

6 20 Complete portfolio construction.

7 20 Empirical tests for market efficiency.

8 40 Returns and Risks Table: “Heat Map” 1996 – 2018.

Total 220

II. Background

The asset allocation decision is likely the most important decision most individual and institutional investors make, the exceptions perhaps being hedge fund, venture capital and private equity portfolio managers.

A sizable body of credible, respected research indicates (or at least indicated until 2008) that the asset allocation decision is the primary determinant of portfolio return, accounting for 90+% of portfolio returns.

Among other things, building effective portfolios requires an understanding of the securities markets/asset classes which may be included in the investor’s portfolio.

Each student will be required to select a securities market/asset class that they will research throughout the semester. Some securities markets/asset classes clearly requiremore work than others as data and information are more challenging to locate. Additional credit will be given for good work on these markets and it will be more difficult to earn points on the easier markets.

II. Getting Started: Assignments 1 and 2

Assignment 1: Due Date February 8, 2019

Assignment 1 has two parts:


Update the master database with monthly opening or closing values of the relevant index for each month of 2017 and 2018. Provide a citation (that I will check) for your data.


Double check the accuracy and consistency of the existing monthly data. In doing so, please be careful that the data are for the index itself and not one of possibly many open-end mutual funds and/or exchange traded funds that track the index.

Take the time to check the existing data from December 1995 through December 2016 for your securities market asset class to ensure there are no errors. Provide a citation (that I will check) for your data.

Locating the data is an easy to straightforward task for several of the asset classes, but an ongoing challenge for others. Data sources include but are certainly not limited to:

  • The business and economic online databases available on the Barry Library website. Be sure to explore the S&P site.
  • An extensive economic and financial database provided by the Federal Reserve Bank of St. Louis.
  • www.msci.comMorgan Stanley Capital International website.
  • Sach’s website.
  • www.nareit.orgNational Association of Real Estate Investment Trust website.
  • Bloomberg Terminal.
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