Corporate Finance (FIN 454)

Assignment-1

The assignment requires applying the Kelly Criterion trading strategy on PSX stocks. Students are
required to download the free simulation app “Investify.” The app allows real-time virtual
investment in publicly listed stocks from PSX. The portfolio will have to be updated periodically,
and hence the submission is required toward the end of the semester.
Following are the step-by-step instructions for the assignment:
1. Download the Investify app.
2. Assume that you have an initial capital of Rs. 100,000.
3. Choose five stocks for investment. It doesn’t matter if the stocks generate high returns –
so best is to choose stocks that are well-known businesses (and get frequently traded).
4. Apply the Kelly Criterion to determine the proportion of capital to invest in each stock.
Make sure to take a snapshot of your portfolio at this stage. You can keep a portion of your
capital uninvested i.e., it is not a requirement to invest the entire amount in the five stocks.
5. Adjust your portfolio every two weeks (or more frequently) by using the recent data from
the last two weeks (in addition to the prior one-year data).
6. Close your portfolio on 5 December 2022. Take a snapshot of the final portfolio.
In Step 4, you will need historical price data of the stocks. You can use any public database like
psx.com, investing.com
The submission of the assignment will be through LMS by using the link in the Assignment tab.
You can customize your report in a way you prefer, but the report should follow the guidelines
below:
1. The report must not exceed 3 pages, excluding the appendices/snapshots.
2. Introduction: The Introduction should simply state the objectives of the report.
3. Strategy: Include a table listing your chosen stocks along with the initial win/lose
probabilities, bet odds, and the Kelly risk factor for each stock.
4. Include a table to show the amount of capital allocated to each stock at the beginning and
the end of the trading activity, in addition to the gains/losses from each stock. The
intermediate portfolio details should be shown in separate tables in the appendix.
5. Performance: A short section about why your portfolio performed the way it did.
6. Recommendation: Add a section about your investment experience and how you would
invest differently if you were to trade real money.
7. All snapshots should be in the appendix.
8. Submit an excel file with historical data of your stocks.
The assignment carries 10% weightage of your overall grade. This is a group assignment, and only
one submission per group is expected.
Start date: 13 September 2022
Submission deadline: 5 December 2022