|
|
|
|
The Investment ComponentAn Investment Component (IC) has
been developed to accompany the CMS. The IC gives participants
a chance to act as an investment manager in identifying companies whose
stocks may outperform or under-perform the market in future periods. The IC works best when operated
concurrently with the CMS. Participants
create investment portfolios based on industries other than their own.
Thus, when three or more industries are operating, it provides investors
with several companies from which to choose.
Optionally, if there are not enough industries, or if the CMS is not
being run currently, data from previous real CMS Trainings can be used
for the IC. How it works Participants in the IC submit
one or more buy or sell orders for one or more portfolios.
These orders will be executed at the end-of-year prices for the last year
for which data are available at the time the order is received.
Participants will have chances to submit orders to be executed for the
decision years 2 through 7 inclusive. Details
on how and when to submit orders will be made available at the introduction. IC participants manage two
portfolios of common stock. Each
portfolio consists of the shares of the companies in one CMS industry.
Initially, each portfolio will contain an equal number of the shares in
each company in the industry, adjusted only for past dividends.
The portfolio is managed by selling stock in one or more of the companies
and buying an equal dollar value of the stock of one or more of the other
companies in the same industry. Participants
cannot hold cash, bonds, or the stock of companies in other industries.
All transactions take place at the previous year’s closing price.
The closing prices are set by the simulation, and are not influenced by
the transactions. There are no
transaction costs or capital gains taxes. If
a company pays a dividend, the cash received will automatically be re-invested
in the shares of that company. The objective is to maximize the end-of-game market value of each of portfolio. The stock prices are set by the game, using publicly available information, i.e., the information in the Industry Reports (IR). A successful portfolio manager will identify stocks that are overpriced or underpriced. Usually this requires identifying relevant information in the IRs that you think is not fully reflected in the price of a company’s stock. You can also use your knowledge about the personalities and capabilities of members of the management teams in these other industries. You cannot talk about strategy to the managers of other teams. Grading/scoring At the end of the game, the terminal value of each actively managed portfolio will first be compared with the terminal value of the appropriate benchmark portfolio. The benchmark portfolio for each industry is the portfolio that would result from holding the initial portfolio with no transactions except for reinvesting dividends. An actively managed portfolio is considered to be a winner if its terminal value is greater than the terminal value of its benchmark. An actively managed portfolio is considered to be a loser if its terminal value is less than or equal to the terminal value of its benchmark. Options The IC can also be used in conjunction with the CMS,
rather than a separate course. Using
a point system, participants in the CMS can “improve” their scores, based on
the performance of their IC portfolio. In
many cases, the IC is only used to add to a participant’s score, and carries
no negative value. Please contact Mr. Tomlinson at pat22@cornell.edu for more information. |
|
Send mail to lhd5@cornell.edu with
questions or comments about this web site.
|
