ACFI5021 | International Finance | Finance

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1. Main Purpose
The main purpose of this assignment is to make students familiar with the investment process and international portfolio management. Its aim is to assist students in accomplishing a good understanding of international markets, investments, and risks associated with currency fluctuations. Additionally, all students are required to meet the appropriate intellectual standard and make use of the available financial databases and articles.

2. Assignment Requirements
Your assignment requires you to follow the market closely for a period of one month and to create a portfolio of stocks that you will manage according to the current international situation. For such an activity you are given a notional £1,000,000 to invest in financial markets.
This project allows you to learn more about international investing and about firms that
compete in the global arena. You are required to do the following.

Do’s:
• Create a stock portfolio of at least four FTSE multinational corporations and at least four(non-FTSE) stocks.
• Monitor the performance of your portfolio at least twice a week.
• Explain why your portfolio performed well or poorly. The explanations will offer insight on what is driving the valuation of the UK-based multinational corporations and the foreign stocks over time.
• From your reading of the FT, Finance Yahoo, Bloomberg and your knowledge of currency events, please work out what is going on in the markets at the moment and try to devise an investment strategy that will make a profit. Use as sources everything that can be available to you, including newspapers, investors’ newsletters, the LSE website,TV programmes, etc.
• For all transactions assume costs of 1 percent.
• If by half-way through the end of the period you lose the entire amount, your boss will give you another £1,000,000 to start again. However, bear in mind, you have to try your best to save your money and make the profit.

Don’ts:
• Do not trade in derivatives’ contracts even if you might have learned it, as the settlement procedures are very complex and it will be impossible for anyone to keep track of their performance unless they are trading in real time with real money.
• You are required to follow an active investment strategy that suits your needs. A pure passive investment strategy where you buy a diversified portfolio in the first week and you keep it until the end of the period is TOTALLY unacceptable. Thus, you are required to trade on average at least twice a week.

3. Reporting Aspects of Your Investment Activity
Keep track of your trading profits and losses, i.e. keep accounts. It does not matter how you keep your accounts so long as you maintain an accrued record of your gains and losses.

4. The Written Report
The written assignment should be around 4000 words in length, word processed. A record of your trading, including all necessary statistical summaries of your portfolio, should be attached to the end of the report as an appendix.

I would recommend that the report be an on-going piece of work throughout the period but should be finalised around one week before the hand-in-date. In the report you should also:
• Explain your investment strategy
• Explain the ideas behind the trades you made
• Explain why your strategy worked and also try to explain the times when your strategy didn’t work
• Provide advice as to what investors could do with their profits gained at the end of the trading period
• Explain how your performance was affected by the currency exchange fluctuations
• Provide advice as to how investors can decrease the risk of their currency exposure

5. Portfolio Evaluation
During your trading period, you should evaluate the performance and behaviour of your stocks.
i. Determine the percentage increase or decrease in each of your stocks over the period of your investment and provide that percentage in a table like the one below. In addition, offer possible explanations for the changes in stock prices in the context of a critical discussion, drawing on the news about these stocks and their wider finance knowledge.
Name of Firm Percentage Change in Stock Price Primary Reason
1.
2.
...
Portfolio average
ii. Determine whether the performance of each of your FTSE-based MNCs is driven by the UK market or not. Go to the site http://finance.yahoo.com/?u and insert the ticker symbol of your stock. Once the quote is provided, click on Chart. Click on the box marked “FTSE100”. Then, click on Compare and assess the relationship between the UK market index movements and the stock’s price movements. Explain whether the stock’s price movements appear to be driven by UK market conditions. Repeat this task for each FTSE-based MNC in which you invested. Do the same for the foreign companies and corresponding foreign markets. Compare each foreign MNC’s prices with those of their home market’s main indices.

iii. Review annual reports and news about each of your UK-based MNCs to determine where it does most of its businesses and the foreign currency to which it is most exposed. Determine whether each UK-based MNC’s stock performance is influenced by the exchange rate movements of the foreign currency (against the UK pound) to which it is most exposed (you can use yahoo!finance or oanda.com). Determine the exchange rate movements over the period in which you invested in the stock. Provide your assessment of the relationship between the currency’s exchange rate movements and the performance of the stock over the investment period. Attempt to explain the relationship that you just found. Repeat this step using your foreign stocks and check the exchange rate movement of the firm’s local currency to the UK pound.

6. Assessment and Marking Scheme
The aim of the assignment is for you to show that you have a good understanding of what is
going on in international markets and why. The majority of the marks will be given to
students that produce evidence of:
• Good understanding of the current international situation
• Good understanding and critical evaluation of international portfolio management
• Good understanding of currency risk
• Critical thinking in the interpretation of the results

When you are looking at your report, some good questions to ask are:
“Does this report show that I could hold an intelligible and well-informed discussion on the current international situation with a market professional, like a stock-broker or an academic in the field?” or “Why should I choose this security instead of the other one?”, or “OK... I
am broke!... what have I’ve done wrong?”

The grade you achieve for this part will depend entirely on the level of understanding demonstrated in your report, your calculations and your sound empirical backing. It will NOT be affected at all by your performance. Hence, your report must be submitted jointly with your excel calculation on a CD.

In terms of referencing, you are required to use the Harvard system of citations. Also, beware of the academic regulations regarding plagiarism. Plagiarisms is an offence that will be not tolerated.

7. The Assignment Submission and Format
The printed assignment together with CD must be addressed to Dr Qinye Lu and submitted to the Student Advice Centre (SAC) for date stamping no later than 1:30 pm on Thursday the 28 March 2019.
The report should be processed in typewritten form.
You are required to submit the report in electronic format on the relevant Turnitin link. The submission of the electronic copy to the Turnitin should be no later than 1:30 pm on the assessment due date. Failure to meet these deadlines will result in the relevant submission
penalties of Late submission up to and including 14 actual days after the submission date 15 or more actual days after the submission date

The work will receive a mark up to a maximum of 50%

If you have a legitimate problem and you are unable to submit your assignment on time,please inform the Module Leader, preferably in person, and go through the prescribedUniversity process for coursework extensions and extenuating circumstances.

8. Essential Qualities of a Good Assignment
• Style-Presentation-Academic Rigour
o The style should be based on the appropriate academic standards.
o The report should be free from spelling, punctuation and grammatical errors.
o All external quotations should be referenced appropriately.
o All citations should be in accordance with the Harvard system of referencing and should be presented alphabetically.
o The work should be presented in a clear and professional manner.

• Analysis and Applicability
o Clear evidence of competent data analysis free from calculation errors and by including presentation and analysis of all key methods used.
o In-depth understanding of the issues examined by drawing appropriate inferences from the data analysis.
o Ability to communicate clearly the implications of your findings.

• Conclusions/ Personal Reflections

o Summary of main arguments.
o Reflection on the experience gained over the preparation and writing-up stage of the assignment.

The above points are not exhaustive but are intended to give you an indication of the core
basic requirements for a good assignment.

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