Instructions on Assessment:
It is assumed that five years ago you read an article by French (2008)1 and the findings of the paper related to
extra cost associated with active investment motivated you to construct a passive portfolio of equities. You
then had inherited 1,000,000 cash in your local currency (i.e. £1,000,000 for UK campus students,
HK$1,000,000 for HK campus students and Qatari Riyal 1,000,000 for Qatar campus students) and you could
make such decisions as: how much to invest, in which equity(ies) and any specific criteria for selection of
equities you wanted to follow.
This year, as a student in the investment management course, you have the opportunity and time to invest
actively. Starting from teaching week 3 of semester one, you are required to invest the money you realised
from passive investment in an active manner for which you have decided to make a thorough economic
environment analysis and forecasting including a reassessment of your risk tolerance and investment
objectives. (In the case that all your investment from the passive portfolio has lost its value, you can borrow at
5% per annum interest rate but only such amount to give you a total of 1000,000 in your local currency at the
start of week 3 i.e. if in week 3 the value of your passive portfolio is above 1000,000, you won’t be allowed to
borrow additional funds). Note the following information for all new trades:
The active trading starts in week 3 of Semester 1 and you should close and realise the value of your investment
in week 12 i.e. you have a total of 10 weeks for active trading. Similar to the passive portfolio, in this period
again, you are required to build and manage investment portfolio of equities. The following trading rules apply:
No use of futures or options, no short sales, no gearing and no exchange traded funds, no investment in bonds.
Week 3 to 12 (10 week period)
During the portfolio management period (week 3 to 12), you are required to rebalance your portfolio to achieve
your investment objectives. At the end of Week 12, you should close your portfolio and carry out the final
Your objective (for both active and passive portfolios) is to outperform the relevant performance benchmark(s)
on a risk-adjusted basis. For UK campus students, your suggested benchmark is a portfolio with 100% invested
1 French, K. R. (2008). Presidential address: The cost of active investing. The Journal of Finance, 63(4), 1537-1573.
in FTSE 250 Equity Index (Bloomberg Ticker: MCS Index). For HK campus students, your suggested
benchmark is a portfolio with 100% invested in Hong Kong Hang Seng Index (Bloomberg Ticker: HSI Index).
For Qatar campus students, your suggested benchmark is a portfolio with 100% invested in Qatar Exchange
Index (Bloomberg Ticker: DSM Index). However, you are allowed to select benchmark(s) that you believe
is(are) suitable for evaluation purpose. Likewise, students are allowed to invest in exchange(s) from anywhere
in the world.
You must value your portfolio and take into account the transaction cost which is 1% of transaction amount
per trade (same for passive portfolio).
You are encouraged to use Bloomberg Financial Database but you can also use publicly available financial
database sources such as Yahoo finance and Google finance. Similarly, you can use Bloomberg portfolio
analysis tools or make analysis through calculations in MS Excel.
In your final investment report, you are required to address the following:
1. Discuss your investment philosophy. Demonstrate how your asset allocation decisions match with
your investor profiling. Forecast the market and discuss what assumptions you made in your market
forecasting analysis. Discuss how it differs from your investment five years ago.
(20 marks, 600 words)
2. Reflect upon your rebalancing strategies. In this section, you should highlight why you bought, held or
sold your shares and whether the rebalancing changed the nature of your portfolio. Your rebalancing
strategies should be supported by relevant investment theories and assets pricing models.
Additionally, you are required to identify relevant behavioural biases and explain your own
irrationalities observed during construction and management of the equity investment portfolio. This
should be strongly underpinned by academic literature.
(40 marks, 1,200 Words)
3. Evaluate your portfolio’s risk-adjusted absolute and relative performance. You should also explain the
performance difference between your portfolio and the given benchmark(s) using techniques such as
attribution analysis and tracking error. Additionally, you should link and evaluate your strategies,
including active and passive, results and risk taking decisions with your investment philosophy. Your
discussion should be supported by relevant theories and academic literature.
(40 marks, 1,200 Words)
You are advised to read the guidance for students regarding assessment policies. They are available
Late submission of work
Where coursework is submitted without approval, after the published hand-in deadline, the following
penalties will apply.
For coursework submitted up to 1 working day (24 hours) after the published hand-in deadline without approval,
10% of the total marks available for the assessment (i.e.100%) shall be deducted from the assessment
Coursework submitted more than 1 working day (24 hours) after the published hand-in deadline
without approval will be regarded as not having been completed. A mark of zero will be awarded
for the assessment and the module will be failed, irrespective of the overall module mark.
These provisions apply to all assessments, including those assessed on a Pass/Fail basis.
The full policy can be found here.
Word limits and penalties
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If the assignment is within +10% of the stated word limit no penalty will apply.
The word count is to be declared on the front page of your assignment and the assignment cover
sheet. The word count does not include appendices, glossary, footnotes, tables, figures and charts.
Please note, in text citations [e.g. (Smith, 2011)] and direct secondary quotations [e.g. “dib-dab
nonsense analysis” (Smith, 2011 p.123)] are INCLUDED in the word count.
The full Word Limit Policy is available here.
The Assessment Regulations for Taught Awards (ARTA) contain the Regulations and procedures
applying to cheating, plagiarism and other forms of academic misconduct.
The full policy is available at here.
You are reminded that plagiarism, collusion and other forms of academic misconduct as referred to in the
Academic Misconduct procedure of the assessment regulations are taken very seriously. Assignments in which
evidence of plagiarism or other forms of academic misconduct is found may receive a mark of zero.
Mapping to Programme Goals and Objectives
This assessment will contribute directly to the following Undergraduate programme goals and
objectives (those with a check mark).
Knowledge and Understanding
√ 6.1.1 Appraise knowledge of contemporary professional practice in business and
management informed by theory and research.
√ 6.1.2 Appraise knowledge of business and management to complex problems in or related to
professional practice in order to identify justifiable, sustainable and responsible solutions.
Intellectual/Professional Skills & Abilities
6.2.1 Evaluate effective interpersonal communication skills and the ability to work in multicultural teams.
6.3.1 Critically self-reflect as a means of informing personal development planning.
√ 6.3.2 Critique their personal skills and attitudes for progression to post-graduate contexts
including professional work, entrepreneurship and higher level study
ersonal Values Attributes (Global/Cultural Awareness, Ethics, Curiosity)
6.1.3 Appraise an awareness of the cultural and ethical contexts in which international
6.1.4 Conduct and critique innovative and/or entrepreneurial project work and research.
√ 6.2.2 Critique creative and critical thinking skills that involve independence, understanding,
justification and the ability to challenge the thinking of self and others.
Assignment Brief – Newcastle Business School
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Module Specific Assessment Criteria
# 90% and above 80-89% 70-79% 60-69%