金融投资模拟2013090101

Team number: 201309010 金融投资模拟实验课程报告投资计划与组合管理原则报告学 院：金融管理学院专 业：财务管理（中加合作）学 号：1012039-1012042组 号：201309010学生姓名：叶明辰,朱益奇,胡文博,王德超指导教师：傅连康,邓鸣茂2013 年 9 月Investment Simulation GameREPORT OF CURRICULUMInvestment Policy StatementEric Ye (Ye Mingchen)Paul Chu (Zhu Yiqi)Spencer Hu (Hu Wenbo)Alfred Wong (Wang Dechao)Author NoteCorporate Finance Bachelor Degree, Sino-Canadian Joint Programme, Shanghai University of International Business and Economics with Douglas College.This paper is submitted on September 20 to Professor Fu and Deng in partial fulfillment of 612.015.201 Investment Simulation Game.ContentsI.Objective and Constraints- 4 -1.Objective- 4 -1.1Risk Tolerance- 4 -1.2Return Objective- 4 -2.Constraints- 5 -2.1Time Horizon- 5 -2.2Other Regular Constraints- 5 -2.3 Unique Circumstances- 6 -II.Statement of Investment Strategy- 6 -1. Subject and Target- 6 -1.1 Basic Information- 6 -1.2 Investment Target- 6 -2. Methods for Valuing- 7 -2.1 CAPM Model- 7 -2.2 APT Method- 7 -3. Investment Strategy- 7 -3.1 Strategy- 7 -3.2How to control risk- 8 -III. Security Risk Control- 8 -1.Definition of Security Risk- 8 -1.1 Systematic Risk- 8 -1.2 Non-systematic Risk- 9 -2.Basic Concept of Risk Management- 9 -2.1 Risk Control Plan- 9 -2.2 Appropriate to Lower Systematic Risk- 10 -IV. Constructing stock portfolio- 11 -1.Stock selecting process- 11 -1.1Overall stock selecting principal- 11 -1.2Detailed stock portfolio- 11 -2.Detailed look at industries- 12 -2.1 Brief industry outlook- 12 -2.2 Constructing portfolio- 13 -2.3 Controlling- 13 -Investment Policy StatementI. Objective and Constraints1. Objective1.1 Risk ToleranceThe primary task to state an investment policy statement is to confirm and quantitate the objective and constraints of the investors. At this time, we will check out risk tolerance by a selected questionnaire. Due to the average score, we could determine our return objective, further on the portfolio. We select a questionnaire from Feathering Your Nest: The Retirement Planner See Appendix A. How Much Risk Is Right for You? to determine the risk tolerance of our group. Based on the questionnaire, Eric scored 24, Paul 32, Spencer 26 and Alfred 23. The arithmetic mean is 26, which means we are semi-aggressive, willing to take chances if we think the odds of earning more are in our favor. The result shows us have a relatively strong tolerance of risk. So we could invest on both conservative Blue Chips and passive Concept Stock. The investment intention of our group is large proportion of stable and profitable stocks with a combination of speculative stocks.1.2 Return ObjectiveThe return objective is the output the investors pursue, which is relevant with the risk in a large extent in the investment. Since we are semi-aggressive investors, we decide to have a rational passive target, which is 12%.The reason for this target is above the following consideration. First of all, the money disposable at beginning is one million RMB, thus we taking a relatively high risk and requiring a high return. At the same time, we have the intension to buy a large proportion of Blue Chips, which have a good return. So we will have a base of this good stock. As a result, we ask for a return of 12 per cent.2. Constraints2.1 Time HorizonThe time period of the investment simulation is relatively short. As a consequence, we focus on those stocks having an immediate increase. For example, Waigaoqiao has a potential to rise up due to the establishment of Shanghai Free Trade Zone which is under government support. In the short run, the price of Waigaoqiao should go up. Meanwhile, we can sell it in a brief space of time and earn a relatively high profit.In short, we will invest this kind of stocks which have strong liquidity and an immediate increase in the short run. We cannot wait for the potential in the long run.2.2 Other Regular ConstraintsTypically in writing investment policy statement we will consider the constraints like liquidity needs, tax, legal and regulatory factors. But we are in the investment simulation game, which means it is virtual, thus not under our consideration.2.3 Unique CircumstancesAs we all known, everyone has his own unique requirements. No exceptions for our group. Some of us pay attention to sports, thus willing to invest in media and culture industry. And some take a close look at high technology industry and willing to buy some stocks under this industry. Some believe we are in the recovery of Great Recession and should buy some under finance industry.II. Statement of Investment Strategy1. Subject and Target1.1 Basic InformationThe clients of investment are us, students and now we attend simulation stock trading with an initial fund of one million RMB.1.2 Investment TargetAs our reference, we focus on four industries, which are sports, finance, medicine and science. Some of us are interested in sports and medicine. In addition, we think we can get a great return in the science industry. At least finance is what we learn and what we are familiar with. So we chose these four industries.State it more specific. First of all, liquidity is the biggest concern. We do not need to do much long-term investment. Instead, we focus on short-term investment. Tax concern, legal and regulatory factors have a lot of influence on our investment decision.2. Methods for Valuing2.1 CAPM ModelIn finance, the capital asset pricing model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well-diversified portfolio, given that assets non-diversifiable risk. The model takes into account the assets sensitivity to non-diversifiable risk (also known as systematic risk or market risk), often represented by the quantity beta() in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset. CAPM suggests that an investors cost of equity capital is determined by beta.2.2 APT MethodIn finance, arbitrage pricing theory (APT) is a general theory of asset pricing that holds that the expected return of a financial asset can be modeled as a linear function of various macro-economic factors or theoretical market index, where sensitivity to changes in each factor is represented by a factor-specific beta coefficient. The model-derived rate of return will then be used to price the asset correctly - the asset price should equal the expected end of period price discounted at the rate implied by the model. If the price diverges, arbitrageshould bring it back into line.3. Investment Strategy3.1 StrategyAfter calculation, we figured out that the level of risk tolerance of group is 26 averagely. So, we are semi-aggressive, and willing to take chances if we think the odds of earning more are in our favor.As a result, we take strategies like semi-active, risk-controlled active and enhanced index approach. Semi-active is that we do not focus on one point in the market. We change our investment fields and keep our money always in the hot-spot industries. 3.2How to control riskHow to control risk is important. We have several steps for guidance. Identify the consequences of each risk. Eliminate irrelevant issues. List all identified risk elements. Assign probability and impact. Determine risk for the element. Rank the risks and compute the total risk. Develop mitigation strategies and develop contingency plans. Analyze the effectiveness of strategies. Compute effective risk. III. Security Risk Control1. Definition of Security Risk Securities transaction risk generally refers the possibility caused by various kinds of subjective and objective reasons of securities operation and purchasing agency in the process of stock jobbery.Security Risk can be categorized to systematic risk and non-systematic risk.1.1 Systematic RiskSystematic risk means the effective change of investment income possibly brought about by considering the overall common factors which unavoidably produce an effect on all the stock returns in the same way. Such risks include market risk, political risk, purchasing ability risk and interest rate risk. It has two characteristics: one is that price fluctuation will to some extent have an impact on all investors; the other is that those investors cannot eliminate system risk by investment portfolio. The way to avoid systematic risk used by the investors mainly is the reverse operation technology of the same trade category in the same time. Namely, hedging is the main function to lower systematic risk.1.2 Non-systematic RiskNon-systematic risk refers to the risk produced by some individual security or special individual industry which has no overall and systematic relation with the entire security markets price but only has some effect on the returns of individual or the minority of security. It specifically includes credit risk, operation risk, and financial risk and so on. In general, it has three characteristics as follows: one is that it is caused by special factors and conditions; another is that it can just influence individual security income not all; the last one is that it can be avoided by investment diversification. Generally, unsystematic risk can be avoided by scientific and reasonable investment portfolio. 2. Basic Concept of Risk Management2.1 Risk Control PlanIn the early time of investment, the investors should carry out the profit target of risk investment according to the correct investment analysis means based on individual risk preference and his or her ability to take risk. In the plan of risk investment, market uncertainty should be fully considered so that he or she carries out solutions and he or she can adopt the second plan or other effective measures to ensure the safety of risk investment in sudden conditions of market investment. The investors also need to ensure the critical point of risk investment. When accident causing loss takes place, he or she should control risk and quit the transaction based on his or her critical point.2.2 Appropriate to Lower Systematic Risk2.2.1 Lower system risk through investment portfolio Systematic risk can be reduced by dispersing through different financial units, seasons, industries and other appropriate methods to disperse system risks, to avoid all funds to be invested in one security, an industry or in one season with a significant amount of investment.2.2.2 Avoid market risks As the market risk is due to various factors of securities themselves, they cause price fluctuations. Therefore, security investors should specifically do the analysis of historical data and find out the rules of the data changes to make sure of the constant growth of profits and revenue, to determine the hold shares short and long term operation; and by analyzing the production characteristics of different industries, the loss of stock price declining caused by production pausing period of related industry and companies can be avoided, and general standard purchasing price can be chosen. Also, stocks have investment cycle, therefore, securities investors can analyze the investment cycle, in order to avoid losses caused by investing time mistake. 2.2.3 Avoid the risk of purchasingNowadays, inflation becomes more and more serious, and continuously growing. So the urgent target is to maintain the value. Holders should find the product growing most by observing the market, then choose the stock of product maintaining the value. Therefore, the measure could avoid the investment risk of inflation and increase the rate of investment.2.2.4To avoid the risk of interest rate:The most effective way to avoid the risk of interest rate is to try to give priority to purchasing more stocks belongs to the companies who have enough equity fund. As interest rates rise, there is a tendency of serious slump for the stocks of a company lack of equity fund. In such circumstances, the analysis of portfolio may be appropriate to reduce risk.IV. Constructing stock portfolio1. Stock selecting process1.1 Overall stock selecting principalOverall in our group, we are all semi-aggressive investors. Also considering that its a short time period investment. So on basic principles, we decided to try our best to achieve a stable growth on our stock portfolio. However, even blue chips are not immune to a drop in the market. Thats why we need to construct a stock portfolio.Thus our basic principal in selecting stocks is to combine most part of our portfolio with stocks which have a big market capital and have modest volatility. Including some big country owned company, like banks, Air China, Baoshan Iron & Steel Co. and so on. Another part of our portfolio would be company with high growth rate. We need them to reach 12%s required rate of return goal. However, those companies like hi-tech companies always go with a great volatility and have big risk. So these stocks would make up about 15 percent in our portfolio.1.2 Detailed stock portfolioNow our group starts to make a more detailed stock portfolio.First of all, we think buying shares in blue chip companies is always a most safe and sound investmentSo, we would choose one or two blue chip companies to invest in. This keeps us a stable growth on our investments. This part would make about30 percent in our portfolio.Second, we are willing to buy some large-cap shares. These shares do have some risk, at the same time they have higher return rate than blue chips. This part would be about 25% in our portfolio.Third, we will buy some small-cap shares, especially high growth rate stocks like high tech stocks. We shall take risk to get high returns, yet since we have other more stable shares, we wont get into a too bad situation. This part will make about 15% percent in our portfolio.In addition, we would invest one ETF as a benchmark to our stock portfolio. Because one ETF contains many different stocks, thus we can measure how the market is performing, thus we can adjust our stock portfolio in time.2. Detailed look at industries2.1 Brief industry outlookAccording to the data on Google finance Web link: .hk/finance?hl=zh-CN, now that media and culture industry is in a good situation. About 91% stocks in this industry are going up on 9.18. So we decided to invest some shares in this industry.Next we are considering financing industry, including banks, investment institution and so on. Although due to financial crisis in 2008, this industry is not so perfect as before. But now its going up and remains a good situation now. In addition, we are all finance institution and major in finance management. So we are familiar with this industry, thus giving us an advantage when choosing and analyzing these stocks.Third, we want to invest in some hi-technology shares, because these stocks may grow up fast. However it may contains bubbles too, so we will be careful about it.Forth, we want to buy some shares in foreign trade companies, because of the establishment of Shanghai trade area, we expect these shares going up.At last, we covered some shares in medical industries. Since our nation is implementing the civil hospitalization insurance. So we will consider medical industries too.2.2 Constructing portfolioAccording to the industries we chose, thus we can construct our portfolio.We chose to buy the following stocks：600648外高桥 15,000shares600018上港集团 10,000shares600557康缘药业 2,000shares000917电广传媒 3,8000shares600019宝钢股份5,000shares159919 300ETF 10,000shares2.3 ControllingThis portfolio has a perfect performance till 2013.9.26 However after that date, the whole stock market stroked down. We lose about 100.000 Yuan. Yet, this portfolio still remain about a 70.000 gain, means its fairly stable. Theres always an old saying that you can never sell at the highest point. So we shouldnt be so greedy next time.We are going to sell immediately when we are satisfied with the growth of the stocks. At last, we will still seek out good stocks which meet our needs. We should be patient, and sell it when it meets our required rate of return.APPENDIX A: How Much Risk Is Right for You?1. You win $300 in an office football pool. You: (a) spend it on groceries, (b)purchase lottery tickets, (c) put it in a money market account, (d) buy some stock. 2. Two weeks after buying 100 shares of a $20 stock, the price jumps to over $30. You decide to: (a) buy more stock; its obviously a winner, (b) sell it and youre your profits, (c) sell half to recoup some costs and hold the rest, (d) sit tight and wait for it to advance even more. 3. On days when the stock market jumps way up, you: (a) wish you had invested more, (b) call your financial advisor and ask for recommendations, (c) feel glad youre not in the market because it fluctuates too much, (d) pay little attention. 4. Youre planning a vacation trip and can either lock in a fixed room-and-meals rate of $150 per day or book standby and pay anywhere from $100 to $300 per day. You:(a) take the fixed-rate deal, (b) talk to people who have been there about the availability of last-minute accommodations, (c) book standby and also arrange vacation insurance because youre leery of the tour operator, (d) take your chances with standby. 5. The owner of your apartment building is converting the units to condominiums. You can buy your unit for $75,000 or an option on a unit for $15,000. (Units have recently sold for close to $100,000, and prices seem to be going up.) For financing, youll have to borrow the down payment and pay mortgage and condo fees higher than