Share Trading Assignment
Project description
Assignment Objectives
You are given a notional 100,000 to invest in the UK stock market in shares listed on the FTSE ALL
Share index. You need to split your investment 50:50 between two portfolios of shares, one where
you selected the shares by technical analysis and the other by fundamental analysis. Your aim is to
beat the market with both portfolios. It is important you can demonstrate that you know the
difference between these methods. You need to compare and contrast the two portfolios and you
need to make explicit reference to EMH in your analysis.
Share Trading Assignment
The assignment is due in on Friday 30th January 2015
Assignment Objectives
You are given a notional £100,000 to invest in the UK stock market in shares listed on the FTSE ALL
Share index. You need to split your investment 50:50 between two portfolios of shares, one where
you selected the shares by technical analysis and the other by fundamental analysis. Your aim is to
beat the market with both portfolios. It is important you can demonstrate that you know the
difference between these methods. You need to compare and contrast the two portfolios and you
need to make explicit reference to EMH in your analysis.
Submission Requirements
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You need to submit a 2000 word report on your trades, including full referencing according
to Harvard APA.
It needs to be submitted to Turnitin.
An appendix with a spreadsheets of your trades (these should not be submitted to turnitin)
Assignment Requirements
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You are given a notional £100,000 to invest in the UK stock market.
You have four months to trade. This means that you are going to have to use short-term
investment strategies.
The aim is for you to try to beat the market. The market is represented by the FTSE ALL
Share Index – if you do not ‘beat the market you will not lose marks, most people will find
it impossible to do better than experienced investors . You must calculate the return on the
market from your first trade to your last trade in order to determine whether you have
beaten the market or not.
The shares MUST be listed on the FTSE ALL Share.
You are not allowed to use derivatives, such as options or any short selling.
50% of your investment must be based upon fundamental analysis and the other 50% on
technical analysis (Based on two theories – no more or less, just TWO).
Each of your portfolios must contain at least 10 shares.
You are allowed to trade as many times as you like.
Recommend Format
Introduction – You need to explain the strategies you used and which if any of your portfolios beat
the market.
Method – How did you select the companies for your portfolios? You don’t have to give a list of
every company and why, it should be in general. The detail should be in the appendix. You need to
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make reference to the technical theories you have used and justify your approach, this should be
done by making direct references to the journal articles read.
Results – How did the portfolios perform? Did they beat the market, which was best?
Conclusion – You need to tie your results back to the literature you have read on the type of analysis
you have used and the EMH.
Appendix – Spreadsheet of all of your trades, with notes on why you chose your companies. The
spreadsheet needs to have profit and loss for each of your shares and should say your final profit.
The spreadsheet needs to take account for trading costs, see below for details.
Sources of Data
Share prices
Yahoo Finance http://uk.finance.yahoo.com/
Morning Star http://companyintelligence.morningstar.com/client/portsmouth you need to access
this from the university
Bloomberg Financial Database – RB1.08. We will be having classes on this towards the end of S1.
This will show you how you can select your companies for the technical analysis.
News & Events
The short view is excellent for videos http://www.ft.com/markets/the-short-view, we will discuss
some in lectures.
Yahoo Finance http://uk.finance.yahoo.com/
Bloomberg Financial Database – RB1.08. We will be having classes on this towards the end of S1.
This will show you how you can select your companies for the technical analysis.
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Calculating the trading costs
The bid
the
price
you sell
at. The
ask is
the
price
you buy
at.
This is the last
share price in
pence.
Above is the share price information from Carphone Warehouse from Yahoo Finance.
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When you purchase shares you must also pay Stamp Duty of 0.5% of the purchase price. There is no
Stamp Duty payable when you sell your shares.
You should also assume that you buy your shares online through an internet broker. Assume that the
broker charges you a flat fee of £7.50 per trade, i.e. £7.50 when you buy and £7.50 when you sell.
Example: You buy 1000 shares at Carphone Warehouse
Purchase Cost
£1,582.50
1000 x 1.5825(ask price)
Stamp Duty
£7.91
£1,582.50 x 0.005
Brokers
£7.50
It is always £7.50 regardless of the size
commission
Total
£1,597.91
Note: You can buy and sell in any amount you like. In our example we bought 1000 shares, but you do
not have to buy in round amounts. For example, you could buy 798 shares or any other number you
like.
Reading
Fama(1991) Efficient Capital Market: II. The Journal of Finance, Vol. 46, No.5 (Dec 1991), pp 1575-1617
Jagadeesh & Titman (1993) Returns to Buying Winners and Selling Losers: Implications for Stock
Market Efficiency. The Journal of Finance, Vol. 48, No. 1, (Mar., 1993), pp. 65-91
Dimson & Marsh (1998)Murphy’s Law and Market Anomalies. Working Paper. pp1-35
Lakonishok, Shleifer; & Vishny (1994) Contrarian Investment, Extrapolation, and Risk
The Journal of Finance, Vol. 49, No. 5. (Dec., 1994), pp. 1541-1578.
De Bondt & Thaler (1985) Does the stock market overreact? The Journal of Finance, Vol 40, No 3.
(July 1985) pp793-805
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