1 Project Number: DZT0516 Stock Market Simulation An Interactive Qualifying Project Report Submitted to the faculty of the Worcester Polytechnic Institute in partial fulfillment of the requirements for the Degree of Bachelor of Science by ___________________________________________ Yung-Wei Tang Date: August 2006 Approved by: __________________________ Professor Dalin Tang Project Adviser
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1
Project Number: DZT0516
Stock Market Simulation
An Interactive Qualifying Project Report Submitted to the faculty
of the Worcester Polytechnic Institute
in partial fulfillment of the requirements for the Degree of Bachelor of Science
In the third week (June-9th-2006 to June-15th-2006), the stock price went down
from 59.85 HK dollars to 56.4 HK dollars. The growth rate of this week became to
-5.76%.
In the forth week, (June-16th to June-22nd) the stock has grown 2.1 HK dollars, and
the growth rate rose up to -2.66%. The stock price is estimated to hold for a while and
then go up.
Esprit Holdings Ltd stock price
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Fig. 4.5 Esprit Holdings Ltd stock price
First Pacific Co
In the first week (May-25th-2006 to June-1st-2006), the stock did not change a lot;
the closing price of the week only grew 2.36%.
On the last day of the second week (June-2nd-2006 to June-8th-2006), comparing the
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stock prices on June 7th and June 8th, only in one day, the growth rate has dropped down
by 6.92%. The total growth rate became to -4.73%.
In the third week (June-9th-2006 to June-15th-2006), the stock price only changed a
little bit. So basically we could ignore the difference.
First Pacific Co stock price
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Fig. 4.6 First Pacific Co stock price
Hite Brewery Co Ltd
In the second week (June-2nd-2006 to June-8th-2006), the stock did not have a very
obvious change the growth rate. It is in the range of 5%.
In the third week (June-9th-2006 to June-15th-2006), the growth rate of this week
(-3.88%) became much better than last week (9.42%). It has grown about 5%. By
following the appearance, the stock is estimate to have a numerous growth in the
following weeks.
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Hite Brewery Co Ltd stock price
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Fig 4.7 Hite Brewery Co Ltd stock price
Tenaga Nasional Bhd
In the passed three weeks (May-25th-2006 to June-15th), the stock price did not
differentiate a lot. But on the last day, it went down about 2.7%. The total growth
rate so far became to -2.19%.
In the forth week (June-16th to June-22nd), the stock has a steady trend, and the
closing price of the week was the same as the starting price from the first week.
According to this phenomenon, this stock is estimate to have a small loss or gain.
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Tenaga Nasional Bhd stock price
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TenagaNasional Bhd
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Fig. 4.8 Tenaga Nasional Bhd stock price
UEM Builders Bhd
In the first week (May-25th -2006 to June-1st -2006), the stock was doing fine. The
highest price per share was 1.29 US dollars on May 31st, and the growth rate was 6.6%.
However, at the end of the week the closing price was 1.17 US dollars. The growth rate
became -3.3%, this is still within the limits.
At the end of the second week (June-2nd -2006 to June-8th -2006), the stock should
be sold since the price went pass the loss limit. Unfortunately no action was taken. It
was really hard to make a decision at that point due to personal emotions. A personal
forecast a growth in next day that is the reason the stock was hold.
In the third week (June-9th to June-15th), the price did not turn out as forecasted.
Therefore, the stock was sold on June 9th with price per share was 1.04 MYR dollars.
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The lack confident on stock of UEM Builders caused a selection of a new stock.
However, the stock was bought back on June-16th. According to observation, the
stock has rise very stably since June-13th. At the end of the forth week, the stock price
reached $1.16, and the growth rate were up to 22.1% during June-13th to June-22nd. The
stock might has chance to grow above the starting price in the following weeks. The
money from selling the UEM stock was again use for its purchase.
UEM Builders Bhd stock price
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Fig 4.9 UEM Builders Bhd stock price
Asian Property Development PCL
In the first week (May-25th-2006 to June-1st-2006), the stock trend was doing fine.
It moved between the upper and lower limit. The highest growth rate once reached
5.52%.
In the second week (June-2nd -2006 to June-8th -2006), the highest price appeared on
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the fist day of the week (3.4 US dollars per share). Unfortunately, the stock price has
dropped down since the first day. The growth rate went 4.3% to -6.75%, a 10% change
in this week.
On the last day of the third week (June-9th to June-15th), Asian Property
Development has dropped over the loss limit (-17.1779%). The stock was immediately
sold.
In the forth week (June-16th to June-22nd), the growth rate of the stock were -21.47%.
It proved that the loss/gain limit strategy does prevent further losses. The money ($8282
US dollar) from selling the stock was not reinvested right away. Trends in the market
are studied before taking the next step.
Asian Property Development PCL stock price
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Fig. 4.10 Asian Property Development PCL stock price
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Dickson Concept
In the first week (June-23rd to June-29th), the stock did not move a lot. The growth
rate of this week is 0%. Hopefully next week the stock will have an outstanding
performance.
Dickson Concept price
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Fig. 4.11 Dickson Concept price
Chinatrust Financial holding Company
In the first week (June-23rd to June-29th), the stock maintained the price of $26 NT
dollars, and the growth rate was –0.19%.
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Chinatrust financial holding company price
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Fig. 4.12 Chinatrust financial holding company price
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Trading Results
Company Total gain or loss % Money of each stock (US dollar)
China Medical Technologies -11.27 8873 Tencent Holdings Ltd -18.49 8151 Jardine Matheson Holdings Ltd -5.4 9460 Jardine Strategic Holdings Ltd 2.7 10270 Tenaga Nasional Bhd 0.55 10055 UEM Builders Bhd -15% Transfer to Dickson Esprit Holdings Ltd 0.91 10091 First Pacific Co -4.72 9528 Hite Brewery Co Ltd -0.97 9903 Asian Property Development PCL -15% Transfer to Chinatrust Dickson Concepts 16.77 9853 Chinatrust Holding Company -0.38 8406 Total 94590
Table 4.14 Total gain or loss %
4.2 Trading results
In the first week (May-25th -2006 to June-1st -2006), most of the selected stocks have
been grown stably (average growth15%). Only three of them have slightly curved down.
Those depreciated shares still have potentials to rise again in the following weeks.
Therefore, none of the stock was sold.
In the second week (June-2nd -2006 to June-8th -2006), a disaster in the global equity
market occurred. This led to the downward movement on all the selected stocks. This
might be ascribed to the rising oil prices, relatively weak US dollars, the surging import
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index and the potential inflation possibility. This phenomenon has made the US
S&P500 index kept falling from the climax of the past five years. The global equity
markets are always following the US market, therefore the loss appeared in the US
market. These Asian emerging stocks are inevitably avoided.
In the third week(June-9th to June-15th), only China Medical Technologies Inc has
grown to 7.82% and the rest of the stocks are in a gloomy atmosphere. Especially the
stock of Asian Property Development and UEM Builders Bhd both drop over the loss
limit and Tencent Holdings Ltd is on the edge of it. More attentions are put on these
three companies and make a precise observation to determine the next step for the
following week. Those two stocks that are below the lower limit will be changed to
others. Early in the week the US market tanked on fears over inflation, on Wednesday
when the inflation news did in fact turn out to be worse than expected, the market rallied.
This might be the main reason why Asia emerging stocks are going down radically.
In the forth week, (June-16th to June-22nd) most of the selected stocks have grown a
little bit (around 3%) except China Medical Technologies Inc and Asian Property
Development PCL. The growth rate of China Medical Technologies was 17%, and the
total growth rate became to -10.3%. There must be some problems in the company.
Usually a stock will not dropped down that much in a week. Since the second week the
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stock of Asian Property Development is still going down. The total growth rate is over
-21.4%. Fortunately the stock was sold when it pass the loss limit. The stock of UEM
Builders rose by 13% from last week, and the total growth rate changed from -17.3% to
-4.13%. Sadly, the stock was sold when it pass the loss limit. There is the cash
($16877.04 US) from selling the stocks of UEM Builder and Asian Property
Development that will be further used for stocks in low point with high potentials.
In the fifth week (June-23rd to June-29th), most of the selected stocks did not have a
big change except Hite Brewery Co Ltd. ’s. The growth rate went down 4.5%. Two new
stocks, Chinatrust Holding Company from Taiwan (R.O.C) and Dickson Concepts from
Hong Kong, were added to the portfolio. The stock was chosen based on looking back
of both history indexes. Both of them have the same symptom that the trend was in low
point and also have strong momentum to grow enormously in two weeks. Each stock
is invested with 8438 US dollars, and the money was from selling UEM Builders and
Asian Property Development. US Fed did raise the interest as expected, and
intentionally said that the inflation was already under control. US Fed has raised the
interest for two years long. Finally the tone of rising interest may be stopped here for a
while. According to these facts above, the global stock market will start going up
deliberately. That is why most of the selected stocks had positive growth rate this week.
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In the sixth week (June 30th to July sixth), all the stocks in the portfolio have great
moves except Chinatrust Holding Company from Taiwan. The growth rate of this
company went down about 3%. The main reason caused this incident was the missile
test in North Korean. United States wants China to use its influence to pressure North
Korea to end its missile tests and return to six-party disarmament talks. Taiwan stock
market always moves with global events like Koran missile test. The average growth
rate of the selected stocks this week is 2.3%. If this trend continues, there would be
magnificent profits in next two weeks.
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Chapter 5: Analysis
5.1 Fundamental analysis
Fundamental analysis is a security or stock valuation method that uses financial and
economic analysis to evaluate businesses or to predict the movement of security prices
such as stock prices or bond prices. The fundamental information that is analyzed can
include a company’s financial reports, and non financial information such as estimates of
the growth of demand for competing products, industry comparisons, analysis of the
effects of new regulations or demographic changes, and economy-wide changes. It is
commonly contrasted with so called technical analysis which analyzes security price
movements without reference to factors outside of the market itself.
A current investor uses fundamental analysis to examine a company’s financial
results, its operations and the markets in which the company is competing to understand
the stability and growth potential of that company. Company factors to consider might
include dividends paid, the way a company manages its cash, the amount of debt a
company has, and the growth of a company’s revenues, expenses and earnings. A
fundamental analyst may enter long or short positions based on the result of fundamental
analysis.
In large organizations fundamental analysis is usually performed in three steps:
First, analysis of the macroeconomic situation, usually including both international
and national economic indicators, such as GDP growth rate, inflation, interest rates,
exchange rates, productivity, and energy prices.
Second, industry analysis is including of total sales, price levels, the effects of
competing products, foreign competition, and entry or exit from the industry.
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Lastly, individual firm analysis is including of unit sales, prices, new products,
earnings, and the possibilities of new debt or equity issues.
5.2 Reason for loses
The following is the brief status description based on fundamental analysis on the
portfolio. A short-term investment does not highly relate to a long-term analysis such as
GDP growth rates, inflation and etc. Therefore, the news of stock market and its impact
are more influential. The US stock market is facing a down turn situation during the
short period of the investment. In order to have a stable return, the higher percentage
of defensive stocks were select compare to speculative stocks. A defensive stock is the
kind of stock that would not have enormous moves and it is more stable in returns. A
speculative stock is the kind of stock fluctuates and can be easily influenced by changes
in global stock market. The following are reason of loses for the portfolio.
(1) Speculative Stocks
China Medical Technologies Inc
China Medical Technologies Inc is one of the speculative stocks, and it incurs a loss
about 1200 US dollars. This stock did have a huge change in the seven weeks trading.
In the first week (May-25th-2006 to June-1st-2006), this stock even went close to gain
limit, but the following three weeks it went pass the loss limit. Since it is a speculative
stock, the global stock disaster causes this stock went down dramatically.
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Asian Property Development PCL
Asian Property Development PCL is also a speculative stock from Thailand. The
mortgage rate of Thailand was going down recently, but this company had really nice
background and potential. Expectation on this stock for the portfolio is to have a
positive return on this stock, but it turn out the other way around. This stock dropped
over the loss limit and was immediately sold. There is a loss of 2000 US on this stock.
UEM
The company UEM ends with a negative 1500 in investment. This stock is a
representative work of speculative; it had a very volatile movement during seven weeks.
From the chart that the stock price was very high in the first week, but the drop pass the
loss limit in second and third weeks. In the forth, fifth, and sixth week, the price went
up and almost reaching the upper limit. Unfortunately the stock was sold when it went
pass the loss limit else the loss incurs on this stock would not be this significant.
Tencent Holdings Ltd
The greatest loss among all the stock in the portfolio is Tencent Holdings Ltd, which is
a loss of 2000US. The company has really good standing from the fundamental analysis,
but this industry in china is not mature. It has good potential but not on the right trend
at this moment. This kind of stocks is more suitable for long term trading.
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(2) Defensive Stocks
Hite Brewery Co Ltd
Hite Brewery Co Ltd is a beer company from Korea. Expectation on this stock was
very high because during the investment period two fact favors the company. The facts
are it is the season for beer and Korea is playing in the World Cup. Koreans should
crazily drink lots of beers in the short period of time, but unfortunately the thing did not
turn out as expected. The growth rate of the stock was -13% for the first six weeks. In
the seventh week, the stock turns around. The growth rate went up 12% in a week. At
the end the stock only loses of 100US. If the investment continues thru eighth or ninth
week, this stock will turn out to be profitable.
.
Jardine Matheson and Strategic Holdings Ltd
Jardine Matheson and Strategic Holdings Ltd are investment companies, and they
involved in many industries. These are defensive stocks, and they would not have a big
alteration in a short period. The combine the result of these two companies is close to
zero. That is reason those stock were selected to be investment base.
5.3 Reason for gains
Defensive Stocks
Dickson Concepts and Esprit Holdings Ltd
Dickson Concepts and Esprit Holdings Ltd are two Hong Kong consumer retail
companies. Usually these kinds of stocks do not follow the trend of Nasdaq or Japan
stock index. US market was in down turn during the period of investment, so these two
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companies were pick as defensive stock options. At the end, Dickson stock gains 1500
US dollars and Esprit Holdings stock gains 100 US dollars.
Tenaga Nasional Bhd
Tenaga Nasional Bhd is an electric company from Malaysia. Even the fundamental
parts of the country dose not do well, but its industry is stable. Therefore, the price of
the stock did not move dramatically. At the end of the investment, 50 US dollars is earn
from Tenaga stock.
5.4 What if – considering different trading strategy and scenarios
The method of gain and loss limit was used to aid in the control of the portfolio. In
this section, different trading guidelines are use to simulate and trace back the stocks
performance. Each scenario will be discuss in detail and compare to loss/gain limit
approach. Each scenario starts with the same amount of money and invest 10000US in
10 selected stocks.
5.4.1 Selling at 15% loss/ gain limits approach
This method was used for the portfolio in this period of time (May 25-July 13).
The average lose for each stock is 3.5% for this eight weeks period. Comparing with Dow
Jones Stock Index, NASDAQ Index, MSCI ex Japan Index, the stock performance using
loss/limits approach is better than NASDAQ (-6.6%), is closing on DJ (-3.3%), and is
lagging behind MSCI ex Japan (-1.0%).
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Three most miserable stocks are China Medical (-16.4%), Tencent (-15.7%), and
Asian property (-17.2%) , which are the speculative stocks.
Portfolio stock Trading Period Currency Opening
Price
Selling at
Up/Dow
n 15%
Gain/Loss
China Medical May 25 -- July 13 US$ 22.63 18.91 -16.4% Tencent May 25 -- July 13 HK$ 17.85 15.05 -15.7% Jardine Matheson
May 25 -- July 13 US$ 18.4 17.7 -3.8%
Jardine Strategic May 25 -- July 13 US$ 10.8 11.2 3.7% Esprit May 25 -- July 13 HK$ 60.15 61.1 1.6% First Pacific May 25 -- July 13 HK$ 3.175 3.05 -3.9% Hite Brewery May 25 -- July 19 KOU$ 103000 103000 0.0% Tenaga May 25 -- July 20 MYR 9.15 9.2 0.5% UEM Builders May 25 -- June 22 MYR 1.21 1.15 -5.0% Asian property May 25 -- June 22 THB 3.26 2.7 -17.2% Dickson June 23 -- July 13 HK$ 8.05 9.25 14.9% Chinatrust June 23 -- July 13 NT$ 26.05 25.75 -1.2%
Average -3.5%
Comparison
Dow Jones index
May 25 -- July 13 11211.0510846.2
9 -3.3%
NASDAQ May 25 -- July 13 2198.24 2054.11 -6.6% Morgan Stanley ex Japan
May 25 -- July 13 370.65 366.76 -1.0%
Table 5.4.1 Selling at 15% loss/gain limits approach
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5.4.2 Buy and hold strategy
Buy and hold strategy is a strategy that holds on the selected stocks thru out the
investment period. Buy and hold strategy performs worse than loss/gain limit approach.
The substitution of the stock in loss/gain approach has improved the performance of the
portfolio.
Portfolio stock Trading Period CurrencyOpening
Price Closing Price
Gain/Loss
China Medical May 25 -- July 13 US$ 22.63 20.08 -11.3% Tencent May 25 -- July 13 HK$ 17.85 15 -16.0% Jardine Matheson May 25 -- July 13 US$ 18.4 17.7 -3.8% Jardine Strategic May 25 -- July 13 US$ 10.8 11.2 3.7% Esprit May 25 -- July 13 HK$ 60.15 61.1 1.6% First Pacific May 25 -- July 13 HK$ 3.175 3.05 -3.9% Hite Brewery May 25 -- July 19 KOU$ 103000 103000 0.0% Tenaga May 25 -- July 20 MYR 9.15 9.2 0.5% UEM Builders May 25 -- June 22 MYR 1.21 1.27 5.0% Asian property May 25 -- June 22 THB 3.26 2.62 -19.6%
Average -4.4%
Comparsion
Dow Jones index May 25 -- July 13 11211.05 10846.3 -3.3% NASDAQ May 25 -- July 13 2198.24 2054.11 -6.6% MSCI ex Japan May 25 -- July 13 370.65 366.76 -1.0%
Table 5.4.2 Buy and Hold Scenario
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5.4.3 Cutting loss when the price is lower than cost or first peak 5%.
Considering this is a short-term investment and the stock average standard deviation
is 5.2%. The cutting point is then set at 5%. This method gives really good result
(+0.2%), which is out performing DJ (-4.5$), NASDAQ (-5.7%) and MSCL ex Japan
(-6.3%). That is because these stocks have good fundamentals. When the market
rebound, these stocks have its heyday. This is like option. Stock option has more
chance to win than index option when the stock is more volatile than the market.
Portfolio stock Currenc
y
Opening
Price High Low Average
Standard
Deviation
Amount %
China Medical US$ 22.63 25.704 18.53 21.93 2.08 9.5%
Dow Jones Index 11211.05 11278.61 10706.14 11044.15 140.70 1.3%
Nasdaq 2198.24 2054.11 2219.86 2141.01 41.52 1.9%
MSCI ex Japan 370.65 377.34 339.63 361.89 11.19 3.1%
Table 5.4.3 Fact sheet of stock price movements
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Portfolio stock Trading Period CurrencyOpening
Price
Cut Loss at
-5% from the
Highest or
Cost
Gain/Loss
China Medical May 25 -- July 13 US$ 22.63 24.5716 8.6% Tencent May 25 -- July 13 HK$ 17.85 16.71 -6.4% Jardine Matheson May 25 -- July 13 US$ 18.4 17.3 -6.0% Jardine Strategic May 25 -- July 13 US$ 10.8 10.8 0.0% Esprit May 25 -- July 13 HK$ 60.15 59.7 -0.7% First Pacific May 25 -- July 13 HK$ 3.175 3.025 -4.7% Hite Brewery May 25 -- July 19 KOU$ 103000 102500 -0.5% Tenaga May 25 -- July 20 MYR 9.15 9.2 0.5% UEM Builders May 25 -- June 22 MYR 1.21 1.17 -3.3% Asian property May 25 -- June 22 THB 3.26 3.24 -0.6% Dickson June 23 -- July 13 HK$ 8.05 9.4 16.8% Chinatrust June 23 -- July 13 NT$ 26.05 25.7 -1.3%
Average 0.2%
Comparsion
Dow Jones index May 25 -- July 13 11211.05 10706.14 -4.5% NASDAQ May 25 -- July 13 2198.24 2072.49 -5.7% MSCI ex Japan May 25 -- July 13 370.65 347.13 -6.3%
Table 5.4.4 Cutting loss when the share prices lower than cost or the peak 5%
5.4.3 Best case scenario -- all stocks selling at their peak/ Worst case scenario -- all
stocks selling at their lowest
The best-case scenario result 6.4%, which is better than DJ (0.6%), NASDAQ (1.0%)
and MSCI ex Japan (1.8%).
The worst case scenario results –11.2%, which is worse than DJ (-4.5%), NASDAQ
(-6.6%) and MSCI ex Japan (-8.4%)
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From the best/worst cases scenario, the market seems in the downward trend during
the period of investment. Any investment during this period has higher risk of losing.
Cash holding strategy may be the best strategy to use in the period.
Portfolio stock Trading Period CurrencyOpening
Price
Selling at
Highest Gain/Loss
China Medical May 25 -- July 13 US$ 22.63 25.704 13.6% Tencent May 25 -- July 13 HK$ 17.85 17.95 0.6% Jardine Matheson May 25 -- July 13 US$ 18.4 19.2 4.3% Jardine Strategic May 25 -- July 13 US$ 10.8 11.7 8.3% Esprit May 25 -- July 13 HK$ 60.15 63.6 5.7% First Pacific May 25 -- July 13 HK$ 3.175 3.325 4.7% Hite Brewery May 25 -- July 19 KOU$ 103000 108000 4.9% Tenaga May 25 -- July 20 MYR 9.15 9.3 1.6% UEM Builders May 25 -- June 22 MYR 1.21 1.29 6.6% Asian property May 25 -- June 22 THB 3.26 3.44 5.5% Dickson June 23 -- July 13 HK$ 8.05 9.4 16.8% Chinatrust June 23 -- July 13 NT$ 26.05 27.1 4.0%
Average 6.4%
Comparsion
Dow Jones index May 25 -- July 13 11211.05 11278.6 0.6% NASDAQ May 25 -- July 13 2198.24 2219.86 1.0% Mrorgan Stanley ex Japan May 25 -- July 13 370.65 377.34 1.8%
Table 5.4.5 Best-case scenario: selling at the highest prices.
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Portfolio stock Trading Period CurrencyOpening
Price
Selling at
Lowest Gain/Loss
China Medical May 25 -- July 13 US$ 22.63 18.53 -18.1% Tencent May 25 -- July 13 HK$ 17.85 14.55 -18.5% Jardine Matheson May 25 -- July 13 US$ 18.4 16.9 -8.2% Jardine Strategic May 25 -- July 13 US$ 10.8 10.2 -5.6% Esprit May 25 -- July 13 HK$ 60.15 55.15 -8.3% First Pacific May 25 -- July 13 HK$ 3.175 2.875 -9.4% Hite Brewery May 25 -- July 19 KOU$ 103000 88500 -14.1% Tenaga May 25 -- July 20 MYR 9.15 8.9 -2.7% UEM Builders May 25 -- June 22 MYR 1.21 0.95 -21.5% Asian property May 25 -- June 22 THB 3.26 2.44 -25.2% Dickson June 23 -- July 13 HK$ 8.05 8 -0.6% Chinatrust June 23 -- July 13 NT$ 26.05 25.4 -2.5%
Average -11.2%
Comparsion
Dow Jones index May 25 -- July 13 11211.05 10706.1 -4.5% NASDAQ May 25 -- July 13 2198.24 2054.11 -6.6% MSCI ex Japan May 25 -- July 13 370.65 339.63 -8.4%
Table 5.4.6 Worst-case scenario: selling at the lowest prices.
Adding standard deviation concept on the analysis, the indexes have lower standard
deviations compare to the portfolio. This implies that the stock index is less volatile
than the portfolio. But when the market is in the downturn, an investment in index may
not turn our better than selecting in more volatile stocks.
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Standard deviation
Lowest Number of
st.dv. Highest
Number of st. dv.
Stock Average 5.20% -11.20% 2.15 6.40% 1.23 DJ 1.30% -4.50% 3.46 0.60% 0.46 NASDAQ 1.90% -6.60% 3.47 1.00% 0.52 MSCI ex Japan 3.10% -8.40% 2.71 1.80% 0.58
Table 5.4.7 Summary
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Chapter 6: Conclusion
Any action should be taken before a well consideration of needs and wants. Setting a
good investment objective is the most important factor for a stock simulation. In the
case of a twenty-year-old man, a stock with higher risk and higher return is being selected
to the portfolio. Capital appreciation and Total Return is set to be the objective of the
portfolio. Beside the objective, a strategy should be selected. There are active, passive,
and hybrid strategies. For the portfolio, an active strategy is being used. Two things
needed to pay special attention are security selection and market timing for an active
strategy. This is much also more suitable for a new investment entrant who is weak in
background knowledge and has limited time.
After analyzing all the personal factors that may influence the whole project decision
and finally decided the investment objective and strategies, the next stage is to choose the
specific countries and stocks that may benefit the most. Overall, five countries were
selected and ten companies were picked in different industries from these countries.
The common point of these countries and companies are low P/E and P/B ratios and high
growth rate. After the 8-week stock simulation, a loss of 5000 US incurred. Although
the investment did not turn out to be profitable, many lessons were learnt during the
process. In this project, the biggest mistake was to setting gain/loss limit too high.
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The range of 15% might be suitable for a 1-year investment action but not for an 8-week
one, because while the stock goes down, there is not enough time waiting for it to bound
up again. Therefore, if the limit is set at 10% or only with partial fund in the market, the
final result might have a better shape. However, this IQP meant to be done during a
summer vacation off campus and due to the limited time, short term trading method was
the only option that for the simulation.
Besides, in order to complete the project in a more efficient and correct way, I applied
for an internship in Jih Sun financial holding Co in Taiwan. The internship experience
equipped me with the ability to access the right information within a short time. The IQP
allowed me to apply fresh knowledge that I have just learned to the real stock market.
These two integrated precious experiences leveraged me from a technical background
person who knows nothing about the finance to a person who now can at least composed
a 70-page IQP project. This is absolutely by far the expectation that I set before I take
this course. So, even though the final result was not so good, I still appreciate the whole
thing.
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References
[1]. Wikipedia website – The Free Encyclopedia. http://en.wikipedia.org/wiki/Main_Page
[2]. Google Finance website. http://finance.google.com/finance
[3]. Morgan Stanley Research Global. “ Asia-Pacific Weekly.” June 19, 2006.
[4]. Credit Suisse Research. “Credit Suisse Asian Daily.” 25 May – 29 June 2006
[5]. Joel M Shulman. “ Investment Analysis and Portfolio Management.” Shulman