Portfolio

ortfolio ProjectVANDERBILT UNIVERSITY
Owen Graduate School of Management

Management 431 Mod II, Fall 2008
Investments

International Portfolio Diversification During a Crisis: ProjectAssume your team has been hired as consultants for a small mutual fund company whose offerings traditionally included only U.S.-based investments. Your task is to investigate the benefits andcosts of creating a new international fund with exposure to European and Asian equities. The mutual fund company is very much concerned with the risks and rewards of international diversification,particularly in the current economic environment. However, the company also wants you to look back at historical evidence for deeper perspectives.

For the purposes of a pilot study, work with stockindex data from the US, UK, Germany, Japan, and Hong Kong. Extract 15 years of monthly data from Yahoo Finance. You can obtain risk-free interest data and currency exchange rates from FRED (FederalReserve Educational Database) and the Bank of England. Examine monthly data for the full 15 year period and also break the period into three 5-year sub periods to examine the consistency of the analysis.For the last two years, examine daily data for a finer analysis.

In the last few months the financial landscape has shifted abruptly. Would you recommend that the mutual fund company introducethis product?

Please submit a PHYSICAL report of your analysis by 4:00 pm Wednesday December 3rd 2008. No reports will be accepted after this time. Electronic versions are not acceptable.Do not submit raw computer output. All figures and tables must be clearly labeled and well- presented. Provide a one-page executive summary. The written part of the report, excluding theexecutive summary, must be shorter than SEVEN pages (double-spaced, 12-point font, standard margins). Tables and figures may be placed in an appendix. Quality and clarity of the written report will be...