FIN 6275 (Part I) Investment Analysis and Global Portfolio Management Spring 2015
Homework 2: Portfolio Evaluation This homework will assess the performance of your portfolio that you created on Bloomberg at the beginning of class. I. Portfolio: 1. Provide a print out of the portfolio you formed at the beginning of the semester.
Hint: Go to Bloomberg and type PRTU. Then choose your portfolio by clicking on it: print and provide that screen which lists what you bought, on what date and at what price
Example:
2. Click on 4) ANALYZE on the red bar to go to performance analysis, and you will view your “Holdings” (gray tab). (You can also get to that screen by typing PORT in Bloomberg.)
There are several other gray tabs. Click on “Performance”.
3. Click on the “Total Return” gray tab on the second row. Choose “Maximum range” for “Time” so you can see your overall performance and leave the ‘Freq’ as ‘Daily’.
Print that screen to submit with the homework:
Example:
4. To extract the portfolio returns in Excel, click on the red tab “12) Actions” “Generate Report” “Current Tab (Unformatted xls)”. 5. Save it and you can do the performance analysis in Section III below in Excel. You just need a benchmark first … II. Benchmark 6. Select an ETF benchmark for your portfolio, e.g. DIA (Dow Jones), SPY (SP500), QQQ (Nasdaq) or a sector ETF (like XLE, XLF, …). The point of the benchmark is that it represents a similar investment style, i.e. U.S. large stocks (DIA), tech stocks (QQQ), … and is a broad market portfolio.
State the ticker symbol and name of your selected benchmark.
7. Then extract the total return index for the benchmark (explained in the Bloomberg tutorial available on my webpage) at the daily frequency for the same period as your portfolio returns.
8. Then compute the total return from the total return index (as explained on the Bloomberg tutorial too.)
III. Performance Evaluation: Compute these measures for your portfolio and the benchmark and fill in the table below.
For each one, briefly state how you have calculated it and what formula you’ve used.
Then in the last column indicate whether the portfolio or the benchmark is better based on each statistic.
| Your Portfolio (P) | Your Benchmark (B)=ticker symbol? | Which one is better? (P or B) | Average daily return | | | | Standard deviation of daily returns | | | | Standard deviation of residuals from single-index model** | | | | Beta** | | | | Sharpe ratio | | | | M2 measure** | | | | Treynor measure** | | | | Jensen’s measure** | | | | Appraisal ratio** | | | |
** These measures should be computed relative to the benchmark, i.e. the ‘market’ is your ‘benchmark’. IV. Conclusion:
Briefly summarize your conclusion about the performance of your portfolio. Did your portfolio outperform the benchmark? 