Finance students in the past have participated in national student competitions. They are a great opportunity to practice and further your knowledge and skills you learned in the finance program at PSU. Because not all of you are finance major, grading will be generous as long as you follow the instructions (e.g., number counts for answers). In addition, it’s not a technical assignment. It’s an opportunity to look back and evaluate what you have learned, how they can be useful, and what else you should learn. Remember you chose finance as your major because you like something about finance. Follow your passion and keep learning what excites you, and you will have a bright future ahead of you. This is the last assignment of this course. Thank you for working hard in this course for the past 7 weeks.
Hint: You may Google search something like “student competitions in finance”.
The title of a finance competitions I would consider is ETF Global Portfolio Challenge.
The eligibility requirements are that an individual must be an undergraduate or graduate student who is enrolled in an accredited college or university.
The student will first register online for free, and then create a portfolio of between 4-10 Exchange Traded Funds (ETFs), using a virtual endorsement of $100 000. The competition registration is from January 18-February 19 (dates for Spring semester 2021. On February 22, the portfolios are tracked for their performance, and can be rebalanced weekly. Results are also released at the end of every week, and on May 10, the winners of the competition are announced (as of market close on May 7).
The deadline for submission was February 19, 2021, however the website offers the competition dates to align with university semesters. There are Fall and Spring semester competitions, so another will begin sometime in September/October 2021.
I am interested in this competition because one of the parts about finance I enjoy is learning about investments and analyzing the markets and sectors to see what the best investments are. I think this competition would be a great learning experience, as you are working with large amounts of money, but if you make a mistake, it is not actually real, and there is no money lost.
The project that I would turn in for the competition would probably include 8 ETFs. To start with, I would give each fund equal weight to see how they do to start, and then adjust as necessary. For example, if I expect one sector of the market that an ETF is in to start doing poorly, then I can adjust the weight so my portfolio will not suffer as much. The ETFs I would invest in are: iShares U.S Financials (IYF), iShares U.S Consumer Services (IYC), U.S Global Jets (JETS), Industrial Select Sector (XLI), JPMorgan BetaBuilders Canada (BBCA), Vanguard Real Estate Index Fund (VNQ), iShares U.S Technology (IYW), and Invesco S&P 500 Equal Weight Energy (RYE).
A large part of financial modeling was learning to evaluate some of the different stock indexes and markets. This is also something that could be done with the exchange traded funds, I would import historical performance into RStudio and evaluate the ETFs using various ratios. Trend analysis or moving average and Bollinger Bands can help calculate how much money would be lost or gained. Density plots can be used to compare returns between different ETFs to help decide which would be a better investment, and I can compare standard deviations and risk of ETFs using tidyquant also. I can compare weights of portfolios using alpha and beta, as well as the Sharpe Ratio to see which would be the ideal weighting scheme of the ETFs for maximum returns and comparing risk.
Some other things that I have learned in finance classes include a basic grasp on economics, how supply and demand chains work, and how they might affect the markets. In some of my other classes, although it might not have specifically been a part of the class, we have discussed investing and investments that my professors/peers have made. Additionally, between my finance and accounting classes, I have learned different performance metrics for stocks/ETFs and ways to evaluate how they are doing in markets. From other classes, we have learned about trends, which can be helpful when choosing sectors to invest in. By analyzing graphs with trendlines and comparisons, we can see the direction that the economy might be headed in and how we can be ahead of the trend (hopefully making money from it!).
Hint: The author of the blog writes articles on financial analysis using R. https://rviews.rstudio.com/categories/reproducible-finance-with-r/
The blog post that I chose was “Introduction to Volatility”. Volatility is important to my project, because if the ETFs that I choose are too volatile, there may be a chance for high reward, but also high risk. I also don’t want to go too safe, because I am going for higher returns. In the post, Jonathan first loads 5 ETFs to create a portfolio, which is also what I am doing in my project. The standard deviation is then calculated, giving us the amount that the returns differ from the mean, using the StdDev function. He also shows how to compare the standard deviation of a single ETF to the standard deviation of the whole portfolio, which can be useful when deciding on how to weight the portfolio. Overall, volatility is an important factor when creating a portfolio, so this post was helpful to show functions we can use to calculate it.
I think something that would be helpful for PSU finance students would be more hands-on experience at the lower levels. Personally, I felt that I didn’t know a lot about finance until this year, and this was also helped by joining the Investment Club, where I got hands-on experience with investment. The sooner we can learn about investment, for those who want to, the better, especially since many finance careers are in investment. Another thing that might be helpful is curriculum that teaches how economics and policy can be applied to finance and the markets. This is taught at some level, but more in-depth learning might be helpful. Lastly, more international finance at different levels might be helpful. There is an international finance class that I will be taking next spring, however I would be interested in learning more about this earlier on. Finance is such a widespread thing, it is all over the world, and the sooner we can learn about things on an international scale, the better and the more opportunities there might be for students.