Economics 328 – February 3, 2004
Portfolio Assignment
Preliminary Study


During the semester I will assign you the task of establishing a portfolio for yourself. You will select and “acquire” assets and manage the investment portfolio for the term. The objective of this portfolio is for you to learn about investment goals, strategy, vehicles as well as the way they are affected by real economic events and often the effects of market psychology. In this since this is not an assignment that will mimic the “real world,” since I will impose constraints with various parts of the assignment. Indeed in some cases (in the real world) you might not be “allowed” to purchase certain kinds of vehicles with your “limited” portfolio!

Your first task will be to pick out three of four stocks for your portfolio before Thursday, February 5h. As you make your selections you should make some notes or a list that indicates why you have chosen each stock. While the “dart board” approach is appropriate for this part of the assignment, if you do have reasons for your selections—record them! Please hand in your list of stocks and reasons for purchasing them on the 5th.

For Thursday, February 5th read Malkiel Part I. Pay particular attention to Chapters 1 and 5. On Thursday we will explore some of the data about stocks that you have put into your “trial” portfolio. (You will not need to keep these stocks in your portfolio during the term.)
As you lightly read the adventures of “bubble,” and wild stock valuations in Chapters 2,3, and 4, pick one interesting example in Chapters 2 or 3 that you find interesting and outline the main elements of that particular craze. Compare this example to the Internet Bubble in Chapter 5. (The internet bubble is still a very touch subject—given that many of us became a part of that history—so it may be easier to learn the lessons of bubbles from the historical examples rather than the one that wiped out so many savings and pension plans!)