Joe Dancy (’76), manager of the LSGI Venture Fund, graciously funded the first LSGI Stock Competition at Michigan Tech’s School of Business and Economics (SBE). Dancy a long-time supporter of Michigan Tech, was recently selected as a member of the SBE Dean’s Advisory Council. He believes a finance education is important to any student’s future, regardless of his/her major.
Accordingly, Dancy donated $1,000 in prize money for a portfolio competition held in the Investment Analysis (FIN 4000) course taught by Dr. Dean Johnson. The course provides an overview of financial products, while discussing the operations of the stock market and bond market. It also delves into portfolio theory, as well as basic stock and bond valuation techniques. Students in this class are encouraged to participate in national stock contests.
Most stock contests select winners based solely on the portfolio with the highest return. This approach unfortunately encourages risk-seeking behavior, which has the potential to send the wrong message to students. Instead, Johnson was able to tie the stock competition to the instruction in his Investment Analysis course. At the beginning of the term, students constructed their portfolios from stocks across all sectors in the economy. After learning the risk-return concept and the mean-variance framework, each student calculated the risk-return measures for their portfolio just like a real world fund. These risk-return measures include the portfolio’s return, standard deviation, Sharpe Ratio, Treynor Measure, Alpha, Beta, R-Squared, M-Squared, T-Squared and Information Ratio. “The competition was not only a significant experience,” remarked student Caihang Li, “but also encouraged me to better myself.”
In the end, three students, Li, Spenser Eller, and Heath Johnson, came out on top based on their portfolio’s risk-adjusted returns. For example, Eller was able to turn a hypothetical $100,000 into $108,834 in eleven weeks versus $101,435 for an investment in the S&P 500 Index. More importantly, his portfolio’s Sharpe Ratio was five times higher than the S&P 500’s Sharpe Ratio! Eller expressed immense gratitude for Dancy’s contribution that made this possible, stating “The money will be put to good use, and the experience that I have gained will be invaluable.”
The SBE, Johnson and the FIN 4000 students would like to thank Mr. Dancy and the LSGI Fund for their continued support in our students’ financial education.