The Student-Managed Fund: A Case Study of Portfolio Properties

This case provides students with an in-depth look at various risk measurements in portfolio management. The primary issues examined in this case are: 1) Review pertinent concepts of describing and summarizing a bath of numerical data in the context of identifying portfolio properties. Although these concepts have been covered in basic statistics courses, it is important enough to go over again so that students may be better prepared for discussions regarding various risk measurements in portfolio management; 2) A distinction between use of geometric and arithmetic return data; 3) How risk is measured in investments, and what some of the measures of risk are used. In particular, it is recommended that a spreadsheet model be used to compute these various risk measurements. Differentiate between different types of risk; namely, total risk, systematic risk, and nonsystematic risk; 4. Demonstrate that the true betas tend to move toward 1.0 over time. With more advanced students, it is recommended that they use the Excel spreadsheet, (or some other statistical software, i.e., SAS or Minitab), to run the single-index regression model and verify these beta estimates. This case has a difficulty level appropriate for senior or first year MBA students. It is designed to be taught in a single class period (60 to 80 minutes). With more advanced students, the case can be assigned as a team project. The team presents their findings and conclusions to the class. If the case is used as a team presentation project, approximately 2 to 3 hours of student preparation time should be adequate for most students depending on their computational ability.