Stock-Trak, Inc. provides students with an inexpensive, and reasonably realistic market simulation. Using real-time quotes, students may trade various securities in a hypothetical portfolio. Stock-Trak, Inc. maintains accounts, accepts trades, and sends out weekly summary reports. This document summarizes the rules that are specific to Dr. Mayes' FIN 4600 class for the Fall 2010 semester. Students should also consult the Stock-Trak site for their rules. Each student will participate in the Stock-Trak simulation project with their own account. Trading will begin on 13 September 2010 and terminate on 26 November 2010. During this period, students are expected to maintain a diary that summarizes …show more content…
Therefore, you need to structure your portfolio such that the weighted-average beta is roughly equal to your target. You do not need to buy only securities with betas close to the target. Even if your target beta is low (high) you may find it beneficial to purchase some securities with higher (lower) betas. The easiest way to find betas for stocks or mutual funds is to use a Web-based resource such as Yahoo!Finance, MSN Investor, or Morningstar. You can also find estimates of betas in Value Line which is available in the library, or calculate it yourself. You will probably have to guess at the betas for bonds. Short-term Treasuries will have a beta near 0, while high-yield corporates will have betas closer to the stock s beta (probably lower). You can use a similar bond ETF to estimate the beta of an individual bond. One resource for fixed income ETF data is the iShares site at http://us.ishares.com/home.htm. Once you determine the betas for your securities, you will need to determine the weights. In most cases, there will be a number of combinations of weights that lead to the portfolio beta equaling the target. I suggest that you use the Solver in Excel (or your favorite spreadsheet) to find some combination of weights that work. Do not focus only on the beta of your portfolio. It is important to remember that you are trying to earn a good return while limiting risk. Therefore, you need to pay attention to security selection as