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Karlsruhe-Liverpool Project

Introduction to Task A

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The Scenario

• You are employed by a team of young investment consultants, which manages personal share portfolios for small private investors.

• The company is growing, and is looking to expand its business and to attract new custom.

• It is keen to investigate new products and practices

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The Tasks

• Task A will be to create and monitor a portfolio of shares to match a given description.

• Task B will be to manage a portfolio of shares worth £100,000 over a three-month period.

• Task C will be to create a prototype version of a decision tool to help advise investors.

All tasks will involve the creation and use of Spreadsheets.

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The Spreadsheets

There are three spreadsheets which accompany Task A

KarlsruheInvestigate.xls

KalsruheTasks.xls

KarlsruheEvaluate.xls

There are three spreadsheets which accompany Task A

KarlsruheInvestigate.xls

KalsruheTasks.xls

KarlsruheEvaluate.xls

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Investigate.xls

The spreadsheet simulates a small Stock Exchange consisting of 8 companies with a range of share values. Share prices are generated over the course of one year (250 working days)

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Investigate.xls

These buttons control which share is being examined

These buttons control which share is being examined

These bars control the different market conditions:

High Confidence means Shares increase

High Variability means the shares tend to move up and down rapidly.

These bars control the different market conditions:

High Confidence means Shares increase

High Variability means the shares tend to move up and down rapidly.

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The Changing Value of the Shares

The share prices are generated using a complex algorithm based on the following factors:» The Confidence of Investors» The Nervousness of Investors» Current Share Price» Recent History of the Share Price» The ‘Natural Variability’ of the share price» The Financial Position of the company

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Investigate.xls

If this box is checked, then a new simulation is carried out every time a button is clicked

If this box is checked, then a new simulation is carried out every time a button is clicked

This will carry out a new simulation regardless of whether the box is checked

This will carry out a new simulation regardless of whether the box is checked

This allows you to see the actual data that is currently being used

This allows you to see the actual data that is currently being used

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Investigate.xls

The actual data that is currently being used (prices shown at the end of the week)

The actual data that is currently being used (prices shown at the end of the week)

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Task A1

• Investigate how the shares behave under different market conditions

• The main part of this task is to determine the confidence level needed to ensure shares rise in value. (Different for each share) £0.00

£20.00

£40.00

£60.00

£80.00

£100.00

£120.00

£0.00

£20.00

£40.00

£60.00

£80.00

£100.00

£120.00

£140.00

£160.00

Confidence = 80%Confidence = 80%

Confidence = 20%Confidence = 20%

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Table 1

Table 1 requires you to work out, for each company:

£0.00

£0.50

£1.00

£1.50

£2.00

£2.50

£3.00• A typical starting value• An upper price limit• A lower price limit• Market confidence level

needed to ensure shares rise in value

• Impression of how variable the shares are in comparison to others.

Upper LimitUpper Limit

Lower LimitLower Limit

To do this, you will need to do lots of simulations, keep records and calculate averages.

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Table 2

Table 2 requires you to summarise, for each company what happens under

• Good market conditions

• Average market conditions

• Poor market conditions

£14.50

£15.00

£15.50

£16.00

£16.50

£17.00

£17.50

£18.00

£18.50

£19.00

£19.50

£13.00

£13.50

£14.00

£14.50

£15.00

£15.50

£16.00

£16.50

£0.00

£2.00

£4.00

£6.00

£8.00

£10.00

£12.00

£14.00

£16.00

£18.00

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Share Portfolio Construction

The main purpose of this activity is to devise a portfolio of shares around £1000 which fits one of the following descriptions:

» Steadfast: A safe investment, even under very poor market conditions

» Moneybuilder: Relatively safe, but under good conditions we would expect a healthy profit

» Prospector: Maximise profit when market is high, but attempt to minimise losses

» Speculator: Take full advantage of high-risk, high profit shares in the expectation of good market conditions

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Portfolio Construction

After you have constructed the portfolio, you will be expected to:» Create a ‘prospectus entry’ for the portfolio

showing the number of shares of each type and the portfolio cost

» Create an end-of-year forecast for the portfolio based on different market conditions

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Portfolio Tracking

The main IT task here is to create a portfolio tracking spreadsheet which keeps a week-by-week record of the portfolio over a one-year period, and includes summary statistics such as graphs, trendlines, averages etc.

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Portfolio Investigation

A further part of the task asks you to create a spreadsheet which allows you to see how the portfolio will behave under a variety of market conditions, and to produce a graph which summarises the results

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Portfolio Evaluation

The final activity is the evaluation spreadsheet which will allow you to see how well your portfolio matches the requirements… or not!

The final activity is the evaluation spreadsheet which will allow you to see how well your portfolio matches the requirements… or not!

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Working in Teams

• For this task, and the two that follow, you will need to work in teams of about four people.

• Each task consists of a range of activities, and will need to be split up if you are to complete them succesfully. The final activity in each

task is the Assessment. This is for Hope students intending to complete the optional Karlruhe module.

The final activity in each task is the Assessment. This is for Hope students intending to complete the optional Karlruhe module.