A86032 Asset Management

All students who have attended the basic course (whose notions are preliminary) must participate in the experiential laboratory. Not allowed students who have not attended the course.

At the end of the laboratory the student will be able to:

• Search for positive alpha stocks (i.e. positive return in excess of the reference index return).
• Run an equity mutual fund according to a well defined investment process and following an active managing strategy.

Students will attend the laboratory in groups of at most three members. Students are responsible for organizing these groups. They will be required to simulate an equity mutual fund subject to restrictions:

1. Only large capitalization stocks and only from a single market.
2. No short-selling.
3. Without derivatives.
4. Active management.

The laboratory will mainly consist of sessions in the Bloomberg laboratory of the library, either with assistance of the instructors (listed in the syllabus below) or independently arranged by the groups, subject to reservation of the Bloomberg workstations with the Library Bloomberg desk.

The last two sessions, in which students will discuss with instructors the results of their simulations will be held in ordinary classrooms.

Sessions of the laboratory will be clustered into two stages.

1. First, they will be required to develop the investment process for their fund and a spreadsheet-based model for portfolio management (portfolio optimization and stock picking), implementing the models discussed in the basic course. Students will select the stocks that they consider the most promising on the basis of the data and the analysts’ opinions gathered from Bloomberg and from any other available information provider. Each group of students will receive a (simulated) amount of cash and, based on their decision and on the models implemented by them, they will manage the positions of their mutual fund. They will be allowed to change their positions according to a set of rules that simulate the working environment of of an asset management firm.
2. Second, students will be required to assess the performance of their portfolios and, based on their results and on the market evolution, they will be required to report the outcome of their investment process, also discussing the portfolio risk profile and the portfolio performance .

“Investments”, any edition, Z. Bodie, A. Kane, A.J. Marcus

Students are required to gather any information concerning the market from publicly-available sources (The Wall Street Journal, The Financial Times, Il Sole24ore, MF etc.)

Results of the laboratory will be graded within  the range 0-3 points not only on the basis of the portfolio performance, but mainly on the basis of the quality of the implementation.