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FIN-5853 Course Project

Every investor has different objectives and constraints. Plus, investors vary in their understanding of the various stock exchanges around the world. The goal of this project is to help you better understand how to construct an investment portfolio and some of the similarities and differences in the various stock exchanges. For this project you will study three different stock exchanges, one in the U.S. and two from other parts of the world that must be from different continents. You will also create 4 investment portfolios and study the differences between them.

The course project begins during Week One and is completed and submitted during Week Seven. You will create and analyze your portfolios using Microsoft Excel. You will also write a report following the instructions below using Word.

The complete project is described in this document for your convenience:

You should create your investment portfolios during the first week. Follow the instructions in the Excel template.

Report Requirements:

The final project for this course is the creation of a market & investment analysis report.

Whether you are a trader, a research analyst, or a portfolio manager, understanding how domestic and international markets behave and are regulated, along with the strengths and weaknesses of various financial instruments is key to determining where, how, and whether to invest. Such decisions, in turn, affect individual clients' choices and collectively can influence how companies are valued and contribute to the overall economic climate.

For the summative assessment in this course, you will produce a market & investment analysis report that analyzes various organized global and domestic markets and compares performance for different investment products. Your analysis report will give an overview of three different markets available, (including one U.S. market and two non U.S. markets from two different continents; discuss the factors that affect market performance (including interest, inflation, and other macroeconomic, social, and political factors); lay out relevant rules, regulations, and governing bodies for the different markets; analyze the performance of various instruments you choose to purchase for your portfolios to assess risks and benefits; and draw conclusions based on your analysis.

In this assignment, you will demonstrate your mastery of the following course outcomes:

1. Explain the concept of portfolio diversification.

2. Evaluate expected return and risk of an investment and compare against alternatives.

3. Interpret value at risk under various assumptions regarding the underlying distribution of returns.

4. Measure performance of a portfolio using Sharpe ratio and Jensen’s alpha.

5. Analyze portfolio performance against a benchmark portfolio.

Prompt

Imagine you are a financial analyst at a major investment bank and will soon be working with clients to construct investment portfolios. To prepare for this work and provide coaching for your continued career growth, your supervisor has asked you to create four investment portfolios with securities purchased from three different continents. Specifically, your supervisor has requested that you prepare a report that describes your reasoning for selecting each security in the four portfolios, from which exchange you purchased the security, and why, and how each security performed in the short time you have for this project.

You will use the FIN-5853 Course Project Template to create four investment portfolios, analyze the portfolios, and compare their characteristics and performance. You will have one opportunity to buy and sell some of the securities in each fund to improve performance. Each portfolio must contain between 15 and 20 securities and the initial value must be between $98,000 and $102,000.

Specifically, the following elements must be included in your report:

Section 1: Market Overview: This section should identify the three continents where you purchased securities, and the reasoning for choosing the continents. It will also include an overview of the markets. In particular, you should briefly:

1. Identify the main features, similarities, and differences in the organized exchanges from which you purchased securities. For example, what instruments or securities are traded in the different markets? Are some markets more focused on certain industries or commodities?

2. Assess recent performance for the markets you are buying securities from. Support your response with specific indicators and examples. For example, which markets are performing well? Which are highly volatile?

3. Select two exchanges from your list of exchanges to discuss:

   1. Discuss the rules, regulations, and oversight bodies for both exchanges.

   2. Discuss the rules and regulations for companies wishing to list on those exchanges.

Section 2: Securities Purchased: This section should discuss your reasoning for purchasing each security in each portfolio. One or two sentences will be enough. You will also explain why you sold securities and the reasoning for the replacement purchase. Organize your discussion by portfolio.

Section 3: Portfolio Performance: You will use data from the Excel template to discuss the performance of each portfolio and compare portfolios and discuss the differences. You will also determine the risk of each portfolio and discuss the risk in relationship to the return. In particular, you should briefly:

1. Discuss the historical average return for each portfolio for the last three years using date from the Expected Return-Risk sheet of the template.

2. Discuss the standard deviation for each portfolio and the relationship between risk and return.

3. Discuss the actual performance of each portfolio and discuss the differences in terms of the relationship between risk and return.

4. Discuss the asset allocation of each fund and how asset allocation affect portfolio performance.

5. Discuss any other reasons why one portfolio performed better than the others.

6. Discuss the same information (A, B, C, & D) after you make changes to the securities held in each fund.

7. Cut and paste sections of your Excel template into your report as needed and as is helpful.

Section 4: Macroeconomic Environment: This section should focus on external factors that can cause markets to move, and how and why those factors influence performance. Specifically, you should:

1. Assess how different economic environments, such as boom and bust cycles, affect markets both individually and collectively. In other words, consider how economic growth or scarcity affects individual markets and how the economic environment for one market affects others. Support your answer with examples from different markets and economic periods.

2. Explain how social and political climates can affect market performance, risks, and returns. Use real-world examples from different markets to support your answer.

3. Discuss how interest rates and inflation affect market performance, using real-world examples from different economic periods to support your answer. For example, how do interest rates affect business borrowing personal investment, and lending?

4. Compare how different types of financial instruments, such as stocks, bonds, mutual funds, and commodities, respond to different macroeconomic environments.

Conclusions: Use this section to draw conclusions based on your analysis. Specifically:

1. Explain the factors that caused one portfolio to perform better than others. Give specific examples.

2. What changes will you make to your personal investment portfolio based on what you learned from this project?

Final Project Rubric