Module Title: Investment Management: Rational and Irrational Markets (2022/23)
Note: You need to start on your assignment task from teaching week 3.
Word Limit: 3,000 words
Weighting This coursework accounts for 100% of the total mark for this module
Submission of
Assessment
Electronic Management of Assessment (EMA): Please note if your assignment is
submitted electronically it will be submitted online via Turnitin by the given deadline.
You will find a Turnitin link on the module’s eLP site.
It is your responsibility to ensure that your assignment arrives before the submission
deadline stated above. See the University policy on late submission of work.
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 (for non-UK campus students it is equivalent local currency) and you
could make such decisions as: how much to invest, in which equity(ies) and any specific criteria for the
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 week 3 i.e., if the
value of your passive portfolio is above £1000,000 in week 3 then you won’t be allowed to borrow additional
funds). Note the following information for all new trades:
Week 3
The active trading starts in week 3 of Semester 1 and you should close and realise the value of your active
investment in week 12 i.e. you have a total of 10 weeks for active trading. Similar to the passive portfolio, you
are required to build and manage investment portfolio of equities only. The following trading rules apply: No
use of futures or options, no short sales, no gearing and no exchange traded funds, and no investment in
bonds.
Week 3 to 12 (10 week period)
During the portfolio management period (weeks 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 valuation. In this period, your objective is to outperform the relevant performance benchmark(s) on a
risk-adjusted basis.
1
French, K. R. (2008). Presidential address: The cost of active investing. The Journal of Finance, 63(4), 1537-1573.
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Assignment Brief – Newcastle Business School
For UK campus students, your suggested benchmark is a portfolio with 100% invested 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 purposes. Likewise, students can 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 the transaction
amount per trade (same for your 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 perform 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 your assumptions 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 asset pricing
models. Additionally, you are required to identify relevant behavioural biases and explain your own
irrationalities observed during the 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, your 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)
ASSESSMENT REGULATIONS
You are advised to read the guidance for students regarding assessment policies. They are
available online here.
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 mark.
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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Assignment Brief – Newcastle Business School
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.
Academic Misconduct
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
business operates.
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.
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Assignment Brief – Newcastle Business School
Module Specific Assessment Criteria
# 90% and above 80-89% 70-79% 60-69% 50-59% 40-49% 0-39%
Q. 1
Outstanding and unusually strong
*discussion of investment
approach, strategies and linkage
with theories that are exemplary.
*discussion of market view which
is fact based and established on
the clear and most appropriate
assumptions. *discussion of asset
allocation decisions which is
clearly linked to investor profiling,
and supported by asset allocation
optimisation process.
Outstanding *discussion of
investment approach, strategies
and linkage with theories that are
exemplary. *discussion of market
view which is fact based and
established on the clear and most
appropriate
assumptions.*discussion of asset
allocation decisions which is clearly
linked to investor profiling, and
supported by asset allocation
optimisation process.
Excellent*discussion of investment
approach, strategies which are very
well linked to and supported by
theories. *discussion of market view
which is fact based and established
on the clear and most appropriate
assumptions.*discussion of asset
allocation decisions which is clearly
linked to investor profiling, and
supported by asset allocation
optimisation process.
Very good : *discussion of
investment approach, strategies
which are linked to and supported
by theories. *discussion of market
view which is fact based and
established on the clear
assumptions. *discussion of asset
allocation decisions which is clearly
linked to investor profiling.
Good : *some good discussion of
investment approach and strategies
which may have a link to and
support from theories *discussion of
market view with some good
assumptions and based on facts
although limited*discussion of asset
allocation decisions but the theory
can provide more support, good link
between asset allocation decisions
and investor profiling
Reasonable: *explanation of
investment approach, strategies
market view, and asset allocation
decisions – but lack of support
from theories; lack of clarification
of the assumptions used; weak
market view. Asset allocation
decisions do not match investor
profiling or limited.
*Limited or very poor
understanding shown on
investment philosophy,
strategies, market view, and
asset allocation concept. The link
between theory, assumptions,
investor’s profiling and the
investment decisions is again
either very poor or missing.
Q. 2
Unusually strong * detailed
research and exemplary
discussion of rebalancing
strategies which are robustly
linked to and fully supported by
relevant traditional investment
theories * understanding and
application of models to back up
your investment decisions;
*academic literature review which
demonstrates a very deep
understanding of the big picture in
investment areas. *identification of
relevant behaviour concepts
comprehensively discussed and
linked to investment preferences
and decisions. *reflections
showing an outstanding
understanding of behavioural
finance and traditional finance with
superb control of writing
*Highly detailed research and
exemplary discussion of
rebalancing strategies which are
robustly linked to and fully
supported by relevant traditional
investment theories * Outstanding
understanding and application of
models to back up your investment
decisions; *academic literature
review which demonstrates a deep
understanding of the big picture in
investment areas. *identification of
relevant behaviour concepts
comprehensively discussed and
linked to investment preferences
and decisions. *reflections showing
an outstanding understanding of
behavioural finance and traditional
finance
*Excellent discussion of
rebalancing strategies which are
robustly linked to and fully
supported by relevant traditional
investment theories * excellent
understanding and application of
models to back up your investment
decisions; *academic literature
review which demonstrates a deep
understanding of the big picture in
investment areas. *identification of
relevant behaviour concepts
comprehensively discussed and
linked to investment preferences
and decisions. *reflections showing
a deep understanding of
behavioural finance and traditional
finance
*Very good discussion of
rebalancing strategies; which are
linked to and well supported by
relevant traditional investment
theories * very good understanding
and application of models to back
up your investment decisions
*academic literature review; which
demonstrates a very good
understanding of the big picture in
investment areas. *identification of
relevant behaviour concepts with
very good discussion and linked to
investment preferences and
decisions. *reflections showing a
very good understanding of
behavioural finance and traditional
finance theories in an integrated
manner
*Good discussion of rebalancing
strategies; which are linked to and
supported by relevant traditional
investment theories *good
understanding and application of
models to back up your investment
decisions; *academic literature
review which demonstrates a good
understanding of the big picture in
investment areas. *identification of
relevant behaviour concepts with
good discussions and linked to
investment preferences and
decisions. *reflections showing a
good understanding of behavioural
finance and traditional finance
theories
*Adequate discussion of
rebalancing strategies; some link
to and supported by investment
theories; understanding and
application of models to back up
investment decisions but not
good enough; some academic
literature review available;
identification of relevant
behaviour concepts and
discussed; reflections showing
reasonable understanding of
behavioural finance and
traditional finance theories.
*Poor, limited or no discussion of
rebalancing strategies; weak
understanding and application or
no application of models to back
up investment decisions; poor or
no academic literature review;
Limited or no reflections or
integration between behavioural
finance and traditional finance
theories.
Q. 3
Outstanding *awareness of risk
adjusted return measures and
performance attribution
analysis,*calculation of portfolio’s
performance as well as
benchmark(s) performance
*performance attribution analysis,
tracking error *linking of results
with irrationality where relevant *
professional presentation,
unusually strong evaluation and
understanding of asset allocation
skills, *especially strong academic
linkage for both active and passive
and other strategies
*Outstanding: *awareness of risk
adjusted return measures and
performance attribution
analysis*calculation of portfolio’s
performance as well as
benchmark(s) performance
*performance attribution analysis,
tracking error *linking of results with
irrationality where relevant *
professional presentation,
evaluation and understanding of
asset allocation skills, *academic
linkage for both active and passive
and other strategies
*Excellent: *awareness of risk
adjusted return measures and
performance attribution
analysis*calculation of portfolio’s
performance as well as
benchmark(s) performance
*performance attribution analysis,
tracking error *linking of results with
irrationality where relevant *
professional presentation,
evaluation and understanding of
asset allocation skills, *academic
linkage for both active and passive
and other strategies
Very good: *awareness of risk
adjusted return measures and
performance attribution
analysis*calculation of portfolio’s
performance as well as
benchmark(s) performance
*performance attribution analysis,
tracking error *linking of results with
irrationality where relevant *
evaluation and understanding of
asset allocation skills and share
selection skills *academic linkage
for both active and passive and
other strategies
Good:*awareness of risk adjusted
return measures and performance
attribution analysis*calculation of
portfolio’s performance as well as
benchmark(s) performance
*performance attribution analysis,
tracking error *linking of results with
irrationality where relevant *
evaluation and understanding of
asset allocation skills and share
selection skills *academic linkage
for both active and passive and
other strategies
Adequate:*awareness of risk
adjusted return measures and
performance attribution
analysis*calculation of portfolio’s
performance as well as
benchmark(s) performance
*performance attribution
analysis, tracking error *linking of
results with irrationality where
relevant * evaluation and
understanding of asset allocation
skills and share selection skills
*academic linkage for both active
and passive and other strategies
Poor, Limited or No: *awareness
of risk adjusted return measures
and performance attribution
analysis*calculation of portfolio’s
performance as well as
benchmark performance
*performance attribution
analysis, tracking error *linking of
results with irrationality where
relevant * evaluation and
understanding of asset allocation
skills and share selection skills
*academic linkage for both active
and passive and other strategies
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