FINA864 Financial Modelling and Analysis

In this assignment, students are asked to build a model to compare the performance between the value and momentum investing strategies for an equity portfolio. Assume that the initial amount invested in this portfolio is $1,000,000. The model should allow the user to conduct an analysis of comparing their profitability and decide which strategy to implement. These two strategies considered are described as follows.

1. In this assignment, we can implement value strategy in three steps. First, we need to identify value and growth stocks for each month. The value stocks are those with theprice-to-book ratios lower than the 20th percentile of this ratio among all the companiesin the sample this month, and grow stocks are those with the price-to-book ratios higherthan the 80th percentile, respectively. Second, we can build a portfolio that buys thevalue stocks and sells the growth stocks at the end of each month. Third, we need torebalance our portfolio monthly, i.e. each month we should update the value stocks thatwe are buying and the growth stocks that we are selling.