Assignment: Share Trading
Assignment Objectives
You are given a notional SGD 100,000 to invest on the Singapore stock market in shares selected from the list of shares in the FTSE ST ALL Share index (listed on the SGX). You need to split your investment 50:50 between two portfolios of shares, one where you selected the shares by technical analysis and the other by fundamental analysis. Your aim is to beat the market with both portfolios. It is important you can demonstrate that you know the difference between these methods. You need to compare and contrast the two portfolios and you need to make explicit reference to EMH in your analysis.
Submission Requirements
- You need to submit a 2000-word report on your trades, including full referencing according to Harvard APA.
- An appendix with spreadsheets of your trades.
Assignment Requirements
- You are given a notional SGD100,000 to invest in the Singapore stock market.
- Use historical and live market data from Monday, 30 May 2016 to Friday, 26 August 2016. This means that you are going to have to use short-term investment strategies. You have two weeks to finalize the report, but you should progressively do parts of the report as you trade during this period.
- The aim is for you to try to beat the market. The market is represented by the FTSE ST ALL Share Index - if you do not 'beat the market you will not lose marks, most people will find it impossible to do better than experienced investors. You must calculate the return on the market from your first trade to your last trade in order to determine whether you have beaten the market or not.
- The shares MUST be listed on the FTSE ST ALL Share Index.
- You are not allowed to use derivatives, such as options or any short selling.
- 50% of your investment must be based upon fundamental analysis and the other 50% on technical analysis (Based on two theories - no more or less, just TWO).
- Each of your portfolios must contain at least 10 shares.
- You are allowed to trade as many times as you like.
Recommended Format-
1. Introduction - You need to explain the strategies you used and which if any of your portfolios beat the market. The target profit is a holding period return of at least 5 percent.
2. Literature Review - This section should provide theoretical and empirical evidence to demonstrate your understanding of EMH and Behavioural Finance and their conflicting view.
3. Rational and Methodology - How did you select the companies for your portfolios? You don't have to give a list of every company and why, it should be in general. The detail should be in the appendix. You need to make reference to the technical theories you have used and justify your approach, this should be done by making direct references to the journal articles read.
4. Results and Analysis - Critically evaluate the performance of your two portfolios. Did they beat the market? Which was the best? Your results should be referenced back to the literature review you have read on the type of analysis you have used and on the EMH.
5. Conclusion - Provide an informed conclusion to your report.
6. Presentation: Structure, clarity, use of grammar, correct spelling, referencing.
7. Appendix - Spreadsheet of all of your trades, with notes on why you chose your companies. The spreadsheet needs to have profit and loss for each of your shares and should say your final profit. The spreadsheet needs to take account for trading costs, see below for details.
Extra Information as following details:
Transaction costs
When you purchase shares you must also pay Stamp Duty of 0.2% of the purchase price. There is no Stamp Duty payable when you sell your shares.
You should also assume that you buy your shares online through an internet broker. Assume that the broker charges you a flat fee of SGD10.00 per trade, i.e. SGD10.00 when you buy and SGD10.00 when you sell.
You can buy and sell in any amount you like. You do not have to buy in round amounts. For example, you could buy 798 shares or any other number you like.
Sources of Data
Obtain share prices and news from financial information sources like yahoo and Bloomberg.
Reading List
Fama(1991) Efficient Capital Market: II. The Journal of Finance, Vol. 46, No.5 (Dec 1991), pp 1575-1617
Jagadeesh& Titman (1993) Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency. The Journal of Finance, Vol. 48, No. 1, (Mar., 1993), pp. 65-91
Dimson & Marsh (1998)Murphy's Law and Market Anomalies. Working Paper. pp1-35
Lakonishok, Shleifer; &Vishny (1994) Contrarian Investment, Extrapolation, and Risk
The Journal of Finance, Vol. 49, No. 5. (Dec., 1994), pp. 1541-1578.
De Bondt&Thaler (1985) Does the stock market overreact? The Journal of Finance, Vol 40, No 3. (July 1985) pp793-805
Guidance How to Preparation Assignment
a) Select a total of 20 stocks/companies or more listed on FTSE ST ALL Share Index(SGX)
b) Divide the 20 selected stocks/companies into two portfolios of equally i.e. 50:50
c) One portfolio of 10 stocks/companies using Technical Analysis to select and monitor the share prices progress starting from May 30, 2016 to Aug 26, 2016.
d) The other portfolio of 10 stocks/companies using Fundamental Analysis to select and monitor the share prices progress starting from May 30, 2016 to Aug 26, 2016.
e) Take the closing price for each day as already shown in class on Aug 26, 2016.
f) Each Portfolio should being with approximately SGD 50,000 worth and/or combined total of both Portfolios (Technical and Fundamental Analysis) of SGD100,000.
g) Any amount of shares for the 20 stocks/companies as long as each portfolio is within approximately SGD 50,000.
How to Start
a) Download the 20 shares/companies listed on FTSE ST ALL Share Index (SGX) from www.yahoo.com(Yahoo Historical) and/or www.sgx.com(Myself already done, kindly refer excel spreadsheet)
b) Divide the 20 shares into 10 shares per Portfolio using Technical Analysis and the other 10 shares using Fundamental Analysis. Each Portfolio should amount to approximately S$50,000. (Myself already done, kindly refer excel spreadsheet)
c) Next choose a minimum of TWO methods/techniques for Technical Analysis and TWO methods/techniques for Fundamental Analysis.
d) You are required to trade (as many times as you like till Aug 26) i.e. buy and sell from now (29 July) till Aug 26. You need to justify the rationale (eg. techniques used) of the sale or purchase from Technical and/or Fundamental analysis standpoint. This is compulsory for both portfolios!
e) But when you first select the 10 stocks/companies using Technical Analysis - you need to substantiate/justify the types of techniques to fulfil assignment requirement.
f) And also for the other 10 different stocks/companies using Fundamental Analysis -you need to substantiate/justify the types of techniques to fulfil assignment requirement.
g) All the evidences for substantiating the reasons for your purchases and sales from both portfolio must be reflected in your assignment report both as Appendix and references in main report write-up. Marks are allotted for proper Appendixes.(Buy and Sell from /on that date have to show the evidence - as attached PDF - Can download from SGX website)
Using Technical Analysis
a) Knowledge (on Technical Analysis) can be extracted from your textbook to ensure you know of the common techniques that you intend to use them to select the 10companiesselection and as well as reason for subsequent trading to make profits.
b) Some of the free websites may give you a quick head-start in understanding Technical Analysis like YouTube, Wikipedia etc. BUT YOU ARE NOT SUPPOSED TO QUOTE THESE WEBSITE.
c) One example of a website that provides FREE charting using Technical Analysis:
1) https://www.stockta.com/cgi-bin/analysis.pl?symb=DBS
This page is using Candlestick, MACD, RSI, moving averages (4 techniques) that can be considered for adopting in your assignment especially the Portfolio using Technical Analysis.
2) https://investexcel.net/make-winning-trades-macd/
(Guide and excel template for reading MACD, RSI, EMA etc.)
3. https://investexcel.net/
(Guide and excel templates such as calculation of beta with historical data, dividend growth rate and many more)
d) There are lots of methods/techniques and you are recommended to use at least two techniques of Technical Analysis for the selection of 10 stocks/companies as well as for subsequent trading till Aug 26 2016.
e) But you just need to comment/write on ONE stock sell from Technical Portfolio using two Technical techniques in your assignment report. (Explanation and specific sell, price and date)Suggest search from Bloomberg news / Global news base on same industry or same sector why the sell rate is increase/decrease? I have sell the shareon date 17th August 2016 - Suntec Real Estate Investment Trust (T82U) SGD1.735
Using Fundamental Analysis
a) There are also lots of Fundamental Analysis which most of you had already learnt mainly from financial analysis like P/E ratio, P/Book value, EV/EBITDA, Dividend Discount Model (DDM), DPS Yield, and EPS, to determine the intrinsic value vs actual market price in both initial Portfolio Selection and for subsequent trading to make profits.
b) Some of the free website to permit a quick head-start in understanding Fundamental Analysis like YouTube, Wikipedia etc. BUT YOU ARE NOT SUPPOSED TO QUOTE THESE WEBSITE.
c) There are lots of methods and you are recommended to use at least two techniques using Fundamental Analysis for the selection of 10 stocks/companies as well as for subsequent trading till Aug 26 2016.
d) But you just need to comment/write on ONE stock sell from Fundamental Portfolio using two Fundamental techniques in your assignment report. (Explanation and specific sell, price and date)Suggest search from Bloomberg news / Global news base on same industry or same sector why the sell rate is increase/decrease? I have sell the share on 17th August 2016-Hotel Royal Limited (H12) SGD3.81
How to Write the Report (Use the Recommended Format - Please refer back on top Page 1)
a) Introduction (approx. 100 words) -
I. Explain the various strategies deployed by you for both Portfolios using Technicaland Fundamental analysis.
II. State with of the Portfolio beat the market by 5%.
b) Literature Review (approx. 700 words) -
I. Brief sentence that begins: during the process of selecting both portfolios you are faced with challenges or conflicting issues causing your selection impacted by both efficient market theories and behavioural impacts from behavioural finance.
II. Cite ample academic theories from the works/articles written by:
1. Behavioural finance - Daniel Kahneman, Amos Iversky, Thaler, Shiller, Shefrin,
2. Academic Authors that talks about behavioural finance impacting on both technical and fundamental analysis.
3. EMH - Fama& French, Lee, Strong & Zhu talks about the how stocks performed pre and post GFC 2008.
4. Academic Authors that talks about EMH impacting on both technical andfundamental analysis.
5. Important to highlight/identify the contrasting views from EMH i.e. share prices resume to efficiency and areas versus Behavioural Finance supersede efficient market like Global Financial Crisis (GFC) or extreme share price changes.
c) Rational and Methodology (approx. 300 words) -
I. State the reasons/rationale on the selection of companies for both Technical and Fundamental (selection and trading) with reference to academic textbooks/journals to support your arguments/analysis.
II. You do not need to have a list of every company but in general for the two port folios. The details MUST in your Appendix.
d) Results and Analysis (approx. 700 words) -
I. Evaluate both Portfolios (Technical and Fundamental) i.e. HPR method from May30, 2016 to Aug 26, 2016.
II. Analyse ONE Stock from Technical Portfolio using TWO Technical Methods as well as ONE Stock from Fundamental Portfolio using TWO Fundamental Methods.
III. Mention whether it beat the market i.e. HPR for Technical and Fundamental whether greater than 5%.
IV. Which of the 2 portfolios did better and why?
V. With regards to "why you beat or didn't beat the market", you need to infer to the works of academic literature (relate to those highlighted under "Literature review" paragraph) on EMH and Behavioural Finance to relate to your actual Portfolios.
e) Conclusion (approx. 200 words) -
I. What have you learnt from this whole assignment of constructing two portfolios?
f) Presentation & Appendix -
- 10% Given to Overall Presentation Structure and Adherence to Academic Referencing
- Another 10% given to Appendix (20 stocks' prices; Technical and Fundamental Analysis, Excel on P/L including trading costs).
Assignment link - https://www.dropbox.com/s/pewqshz7oylv26w/Assignment.rar?dl=0
Attachment:- ASSIGNMENT.rar