Portfolio Essay

995 words - 4 pages

MANASA KARUSALA
DIVYA YEDAMA

1) What was your strategy in the classroom market? What did you think each of the assets was worth? Were you able to implement your strategy? Why or why not? Why (or why wasn't) your strategy successful?
My strategy was to equalize both the red and blue assets, as it is impossible to predict before hand which asset would have more value. But I couldn’t implement my strategy, as it is not easy to maintain that equivalence especially when the entire market is active with too many active participants. Though I did not implement my strategy, as I was unable to compete in the active market and couldn’t buy or sell the assets, I am among the people with highest ...view middle of the document...

To understand this let us see an example. If a person is given two options and asked to choose one among them he chooses the one, which pays less but has less risk and has more certainty of obtaining rather than the one, which pays, more but has less certainty.
I didn’t to be risk averse but seeing my results I was risk averse.
The market as a whole wasn’t risk averse.

4) Using the average trading prices of the red and blue assets, calculate the expected returns, and the standard deviation of returns. Calculate the returns based on purchasing each asset at the average trading price, and liquidating the asset after the market closes. Also calculate the correlation between red and blue asset returns.

GAME 1 | | | | |
| RED PRICE | BLUE PRICE | RED return | BLUE return |
| 21 | 21 | 42.86% | -71.43% |
| 20.9 | 21 | 43.54% | -71.43% |
| 20.9 | 21 | 43.54% | -71.43% |
| 20.9 | 22 | 43.54% | -72.73% |
| 20.5 | 21 | 46.34% | -71.43% |
| 20 | 25 | 50.00% | -76.00% |
| 21 | 23 | 42.86% | -73.91% |
| 22 | 25 | 36.36% | -76.00% |
| 21 | 25 | 42.86% | -76.00% |
| 21 | 25 | 42.86% | -76.00% |
| 20 | 24 | 50.00% | -75.00% |
| 21 | 26 | 42.86% | -76.92% |
| 20 | 26 | 50.00% | -76.92% |
| 23 | 24 | 30.43% | -75.00% |
| 22 | 25 | 36.36% | -76.00% |
| 20 | 24 | 50.00% | -75.00% |
Average | 20.95 | 23.63 | 43.40% | -0.74 |
Standard deviation | 0.8 | 1.80 | 5.31% | 0.02 |

Correlation : 0.0362

GAME 2 | | | | |
| RED PRICE | BLUE PRICE | RED return | BLUE return |
| 22 | 22 | -45.5% | 0.00% |
| 23.5 | 21 | -48.9% | 4.76% |
| 23 | 21 | -47.8% | 4.76% |
| 26 | 20 | -53.8% | 10.00% |
| 22 | 21 | -45.5% | 4.76% |
| 23 | 21 | -47.8% | 4.76% |
| 23 | 19 | -47.8% |...

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