Citation:

Steven Todd. "A Technology-Based Experiential Learning Model for Portfolio Management" International Research Journal of Economics and Management Studies, Vol. 3, No. 6, pp. 421-428, 2024.

Abstract:

This paper describes an experiential learning model for portfolio management that I’ve been using for 10 years with moderate success. All course lectures, discussions, homework, and exams center around a semester-long group project in which four-person student teams manage a portfolio of assets and endeavor to generate positive alpha relative to known benchmark security, which is priced daily. The project attempts to replicate the experience of an asset manager employed by a mutual fund or hedge fund. It leverages several web-based technologies: a virtual trading platform with real-time security prices, various databases, and several analytical models to value and examine securities. The project allows for a wide variety of investment strategies that can satisfy the preferences of students with varied interests and investment knowledge. Students produce research to support security selection and trading activities; they also compute portfolio statistics, such as alpha, tracking error, and turnover. This course design improves student engagement and learning outcomes. Moreover, on average, the students generate respectable alphas.

References:

[1] Andresen, L., Boud, D., & Cohen, R. (2000). Experience-Based Learning. Understanding Adult Education and Training (2nd ed.). London: Routledge.
[2] Dolan, R., & Stevens, J. (2010). Experiential Learning for Undergraduates in Economics and Finance: A True Top-Down Investment Fund. Journal of Financial Education, 36(1), 120 – 136.
[3] Farnsworth, H., Ferson, W., Jackson, D., & Todd, S. (2002). Performance Evaluation with Stochastic Discount Factors. The Journal of Business, 75(3), 473–583. https://doi.org/10.1086/339902
[4] Fung, W., Hsieh, D. A., Naik, N. Y., & Ramadorai, T. (2008). Hedge Funds: Performance, Risk, and Capital Formation. The Journal of Finance, 63(4), 1777–1803. http://www.jstor.org/stable/25094489
[5] Hysmith, R. (2020). Student-Managed Investment Fund Participation and Financial Knowledge, Satisfaction, and Behavior. Journal of Financial Education, 46(2), 251-270.
[6] Kolb, D. A. (1984). Experiential Learning: Experience as the Source of Learning and Development. Englewood Cliffs, NJ: Prentice Hall. http://academic.regis.edu/ed205/Kolb.pdf
[7] Mallett, J., Belcher, L., & Boyd, M. (2010). Experiment No More: The Long-Term Effectiveness of a Student-Managed Investments Program. Journal of Financial Education, 36(3), 1 – 15.
[8] Shu, H., Tan, W., Wang, Q., & Yu, J. (2022). Application of Experiential Learning Pedagogy in Higher Education. Journal of Financial Education, 48(2), 51-66.
[9] Todd, S., & Velarde, D. (2024). Student-Managed Investment Funds Turn Pro: Innovation, Benchmarking, and Performance. Journal of Investing, 33(3) 95-107.
[10] https://nsse.indiana.edu/research/annual-results/past-annual-results/index.html
[11] Teams of five or six students also work fine. Two students on a team can share a role.
[12] The first actively managed global macro exchange traded fund was issued in 2009. Hedge fund performance is benchmarked at www.hfr.com; however the data are only updated monthly.
[13] See www.stocktrak.com.
[14] Annual data on student engagement can be found at the following link: https://nsse.indiana.edu/research/annual-results/past-annual-results/index.html

Keywords:

Undergraduate Teaching, Pedagogy, Virtual Trading, Databases, Mutual Funds, Hedge Funds.