The markets had reversed from their 2008 lows and the returns were very good across the world markets for the first nine months of 2009. So, what should a fund manager or investor do? Be totally invested in the market going forward or the ‘Cash Is King’ strategy is the one that should be followed? With a view to identify what the future leaders at NUS business school think, the NUS Finance club returned with its annual virtual stock exchange competition with USD 1 million as virtual cash to trade and the US stock markets as the target.
Rahul Gupta, a first year MBA student was the winner of the competition with a return of 20.18% over the 40 day period. Kirti Chopra, 2nd year MBA student followed him closely and it wasn’t till the last day that one could actually gauge who would win it. Here is what Rahul had to say about his overall experience and trading methodology.
Rahul Gupta, a first year MBA student was the winner of the competition with a return of 20.18% over the 40 day period. Kirti Chopra, 2nd year MBA student followed him closely and it wasn’t till the last day that one could actually gauge who would win it. Here is what Rahul had to say about his overall experience and trading methodology.
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“The virtual stock exchange was something that I had heard about from the finance club office bearers during the briefing for the new batch in August. I had never traded on American stocks, not even paper trading. So, here was an opportunity to do so and finally we started in mid October.
To begin with I was a little sceptical as to what should be my strategy. I remember asking a few people from the senior batch about the possible strategies. I was told to stick to good fundamental companies and invest in stocks you are well read about. However, the stock market especially one which has virtual money involved gives you an opportunity to try your own strategies and so I started with my own strategy of pair trading to begin with. I choose the airline sector; choose two stocks i.e. one highly overpriced and one underpriced based on the market movements over the last few months and weeks. I shorted the overpriced one and bought the underpriced one. But then that was my analysis and the market did not think so. The stocks moved against my bet and there I was at the bottom of the virtual stock exchange competitor list. I was amused at the market movement but then that is how the market works. You believe you have a winner at your disposal and become complacent and then realize the market has again outsmarted you. However I stuck to my investment rationale and increased my position in the two stocks further. Finally, by the end of the first week I was able to make some profit but little in comparison to others.
I thought of changing my strategy and being more of an intraday trader for the competition. At that juncture the EURO was making highs against the Dollar and I felt that the dollar would rebound and so should be bought. The only way to get a position in a currency through the stock exchange without entering the FX market was through ETFs. I started reading on ETFs and finally lay my bets which proved quite fruitful. Apart from these there were a few momentum stocks from the financial services and technology sectors on which I banked upon and was rewarded.
It was a good 40 day experience wherein I understood about the functioning of ETFs and employed some of my personal strategies. It was great to win as it is always. ”
To begin with I was a little sceptical as to what should be my strategy. I remember asking a few people from the senior batch about the possible strategies. I was told to stick to good fundamental companies and invest in stocks you are well read about. However, the stock market especially one which has virtual money involved gives you an opportunity to try your own strategies and so I started with my own strategy of pair trading to begin with. I choose the airline sector; choose two stocks i.e. one highly overpriced and one underpriced based on the market movements over the last few months and weeks. I shorted the overpriced one and bought the underpriced one. But then that was my analysis and the market did not think so. The stocks moved against my bet and there I was at the bottom of the virtual stock exchange competitor list. I was amused at the market movement but then that is how the market works. You believe you have a winner at your disposal and become complacent and then realize the market has again outsmarted you. However I stuck to my investment rationale and increased my position in the two stocks further. Finally, by the end of the first week I was able to make some profit but little in comparison to others.
I thought of changing my strategy and being more of an intraday trader for the competition. At that juncture the EURO was making highs against the Dollar and I felt that the dollar would rebound and so should be bought. The only way to get a position in a currency through the stock exchange without entering the FX market was through ETFs. I started reading on ETFs and finally lay my bets which proved quite fruitful. Apart from these there were a few momentum stocks from the financial services and technology sectors on which I banked upon and was rewarded.
It was a good 40 day experience wherein I understood about the functioning of ETFs and employed some of my personal strategies. It was great to win as it is always. ”
-Rahul Gupta
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