Returns analysis;Compute the average daily return on your portfolio and your benchmark (the benchmark is the S&P 500 to download the S&P 500 index values). Use this to find the annualized return for each ( Sharpe Ratio directions to see how to annualize t
Returns analysis
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Compute the average daily return on your portfolio and your benchmark (the benchmark is the S&P 500 to download the S&P 500 index values). Use this to find the annualized return for each ( Sharpe Ratio directions to see how to annualize the returns).
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Did you beat the S&P 500 index?
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Which three securities were your biggest winners? Which three were your biggest losers? Measure winners and losers in percentage returns, not dollars. What were the firm-, industry- and market-related events that led to the extreme performance of these six stocks (address all three)? Be specific. You may include print or Internet articles that support your analysis in your appendix.
S&P 500 Benchmark
You need to download the historical values for the S&P 500 to calculate the beta of your portfolio. This is how to do it in StockTrak:
1.
Get the quotes for the S&P 500 index
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Under the “QUOTES/RESEARCH” drop-down list, select “Quotes
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Type “^SPX” in the search box and put a check in the box next to “Search by Symbol”.
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“^SPX S&P 500” should be at the top of the list – select it.
2.
Get the price history for the dates of the trading simulation:
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Go to “PRICE HISTORY” on the bar on the bottom, left-hand side
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Select the dates of trading and then click “Show Results”
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Trading began 9/25/2018
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Trading ended 11/26/2018
3.
Download the historical prices:
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Click the red “Download” button on the top, right-hand corner of the table with the prices
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Download for selected dates
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Save the file to your computer
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Open the file in excel
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It is not an excel document, but it might automatically open as an excel document just by double-clicking on it
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If it does not open with excel, right-click on the file and select “Open with” from the menu, then select Excel
4.
Use the closing index value to calculate the daily benchmark returns
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Sort the data using the date
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Highlight all columns of data
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Go to Data -> click on ‘Filter’
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Use the drop-down menu at the top of the date column to sort Oldest to Newest
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Calculate the daily return starting with the second row
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return = (P1 – P0)/P0 = P1/P0 – 1
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P0 = previous day’s closing value
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P1 = current day’s closing value
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Note: The returns are included in the download, but you should not use the values provided because they are rounded. They are also expressed as a percentage rather than a decimal (e.g., a value of 0.276 is actually 0.276% or 0.00276).
Sharpe Ratio
First, download your daily portfolio values:
1.
Go to My Portfolio -> Graph My Portfolio
2.
Click on Export to Excel above and to the right of the graph
Next, follow these steps to find the Sharpe Ratio (see this handout for more details)
1.
Calculate daily portfolio return values
2.
Calculate average daily return
3.
Calculate geometric mean
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Use n=41 in the formula on the handout (restrict your sample to the days the market is open, which are the days you have available data for the risk-free rate and S&P 500 returns)
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or, use the GEOMEAN function in excel (add one to returns before using GEOMEAN, then subtract 1 from your answer)
4.
Calculate expected (annualized) portfolio return
5.
Subtract the risk free rate from the annualized portfolio return
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Use a risk-free rate of 3.96% (this is what you should get for the annualized risk-free rate)
6.
Calculate the standard deviation of daily returns
7.
Annualize the standard deviation
8.
Divide the risk premium (#5) by the standard deviation (#7) to find the Sharpe Ratio
Note: To find beta, you have to limit your sample to the days that the market is open because those are the only days we have information for the S&P 500 and risk-free rate. You should also use this reduced sample to calculate the standard deviation of your portfolio returns
