BAFI1042
Assessment Task 3: Equity Portfolio Management Report
Overview
You are to construct two equity investment portfolios-a passive replication portfolio and an actively managed portfolio- by selecting stocks from an index of ten companies selected by the lecturer, which are listed on the Australian Stock Exchange.
You will then prepare a report in which you are to explain your investment strategy for both portfolios and then evaluate the investment performance of each in terms of absolute and relative return, risk and attribution effects to explain the differences in the performance of each portfolio.
Assessment Details
You will be given funds to invest in the share market. You are required to construct two $1,000,000 equity investment portfolios:
1. A passive portfolio replicating the return of the index
2. An active portfolio to achieve your investment objective of outperforming the index
You will then prepare a report in which you can explain your investment strategy for constructing a passive and an active portfolio and then evaluate the investment performance of each in terms of absolute and relative return, risk and attribution effects to explain the differences in performance of each portfolio. You will be given an equally weighted index of ten companies selected from companies listed on the Australian Stock Exchange.
This assessment replicates the tasks that would be undertaken by portfolio managers in a real-world investment company. For the passive portfolio, your task will be to replicate, as closely as possible, the risk and return characteristics of the benchmark index.
Your task is not necessarily to produce a positive return. If the markets fall in value, then your passive portfolio should fall in value by a similar degree. Your active portfolio should aim to outperform. the return on the index: if the index falls, your portfolio should fall by a lesser amount; if the index rises, then your portfolio should rise by a higher amount.
Learning Outcomes
The targeted Course Learning Outcomes for this assessment are:
CLO1: Examine the general investment framework and assess the importance of asset allocation as an investment strategy
CLO2: Illustrate the concept and application of modern portfolio theory, capital market theory and examine their relation to multifactor asset pricing models
CLO3: Review the difference between fundamental and technical analysis while making an investment decision
CLO4: Evaluate the performance of a listed company by investigating the impact of various economic indicators and applying security valuation techniques
CLO5: Create and analyse active and passive portfolios by examining the role of risk and return in the investment decision process
CLO6: Compare and contrast different performance evaluation techniques to assess the performance of a portfolio manage