Financial Modelling assignment
Paper details:
You are a quantitative analyst in a US-based investment management company. The company is planning to launch a new fund that will invest in the 30 stocks of the Dow Jones Industrial Average, using a momentum trading strategy to identify possible excess return opportunities. The fund will be rebalanced annually, and is not allowed to take short positions. You have been tasked with designing the strategy that will be used by the new fund, and evaluating its historical investment performance.Use the data provided to form an optimal active portfolio of the stocks each year, with the first portfolio formed in November 2006. The
views for the active portfolio should be based on a momentum trading strategy applied to one or more of the individual stocks. Evaluate the performance of the active portfolio. The evaluation should take into account both the return and the risk of the portfolio. You should compare the performance of the active portfolio with one or more passive benchmark portfolios. This assignment deals with excel as well as research part. I would like assistance with the research bit regarding what is momentum trading strategy- which momentum should be used, what is active portfolio and benchmarking, which models should be used for this report. I am attaching notes so you could use those for better understanding of the assignment. Could you also tell me how many stocks should be used to construct the new fund and on what basis?
