Imagine that you are designing a portfolio investment strategy proposal that is

by Caaltu · May 20, 2024

Imagine that you are designing a portfolio investment strategy proposal that is going to be implemented and offered to potential investors/elients of a fund. In this group project, you have to write a portfolio investment strategy proposal. You will have to do your own research to construct and find an interesting portfolio.
You will need to provide a detailed explanation of the chosen portfolio investment strategy, discussing its advantages and disadvantages. Argue why your selected strategy outperforms alternative options. Replicate and backtest the proposed strategy to support your arguments. The write-up should be concise and to the point, with a maximum of 2,000 words.
Address and justify the following questions:
1. Why should the investor follow your portfolio investment strategy over others? Specify if you propose an active, passive, or hybrid approach and explain your reasoning.
2. Quantify the expected excess return, volatility, Sharpe ratio, and other relevant performance measures for your strategy.
3. Is your portfolio investment strategy delivering alpha? Assess whether it exploits a mispric-ing that will be arbitraged away or provides compensation for risk.
4. Quantify the strategy’s performance using risk factor exposures. In other words, estimate alphas and betas using the CAPM and Fama-French three-factor model. Interpret the results.
5. What are the main costs associated with implementing your portfolio investment strategy?
6. Conduct a performance attribution analysis on your portfolio.