Lecture 3 extra - Introduction to the Group Project 2016_17 v.6.pdfVIP

BMAN71171 Portfolio Investment Lecture 3 extra: Introduction to the Group Project Chris Godfrey (christopher.godfrey@manchester.ac.uk) Office Hours: Wednesdays(email for appointment) 1 Source: Analysis of Investments Management of Portfolios Ninth Edition by Frank K. Reilly Keith C. Brown The Group Project ? Purposes: – To simulate acting as a professional fund manager – To gain experience making macroeconomic and industry forecasts – To gain experience picking stocks for portfolios – To gain experience using BARRA risk-management software – To gain experience working in a group of team members chosen at random 2 The first key point: ? Its all using historic data. ? When you construct portfolios as at 1st February 2016, you will need to make them on the basis of your macroeconomic and industry forecasts. ? For this, you need pretend that you are back in January 2016, and that you only have access to the data which was available then when making your forecasts. ? The important thing is not whether your macroeconomic forecasts were correct as revealed by subsequent history. ? The important thing is how you make and argue your macroeconomic forecasts 3 The first key point: ? For countries: – Where are they (were they) heading at the time? – GDP, employment, interest rates, political risks, budget situation – Which countries would you rather go overweight on, as at 1 February 2016? Why? Argue it. – Which countries would you rather go underweight on , as at 1 February 2016? Why? Argue it. 4 The first key point: ? For countries: – Where are they (were they) heading at the time? – GDP, employment, interest rates, political risks, budget situation – Which countries would you rather go overweight on, as at 1 February 2016? Why? Argue it. – Which countries would you rather go underweight on , as at 1 February 2016? Why? Argue it. 5 The first key point: ? For industries: – Where is (was) the world in terms of econom