universität t hohenheim t hohenheim - Lehrstuhl für Bankwirtschaft


universität t hohenheim t hohenheim - Lehrstuhl für Bankwirtschaft


Lehrstuhl für Bankwirtschaftt

und Finanzdienstleistungen

Portfolio Portfolio-Manageme Manageme ent: Trading Systems

Definition trading systems

• Combination of conditions and instructiions

for automatic trading with securities

• Frequently based on portfolio analysis

• Other possibilities: arbitrage, speculatioon

• IImplementation l t ti of f an algorithm, l ith which hi h

or technical analysis

generates t trading t di signals i l

• Back-testing of the trading system usin ng historical data

Algorithm trading

Algorithm trading

• Rising percentage of algorithm trading

• Computer-based, Computer based, systematic trading w ith automatically generated trading


• Latency period as an important aspect


• Possible advantages:

» Liquidity, lowering of Bid-Ask-Spreads

» lower market impact

• Possible disadvantages:

» Di Discrimination i i ti of f individu i di idual

liinvestors t

Competition to trend trading systtems

• Compulsory for participants of Portfolioo-Management

• Target: Outperformance of the trading

• Exclusively traded is the „Templeton Emerging

Market Fund“

• AAvailable il bl ddata: t

• Historical data of the security

• Market estimations of US-investorss

system of the Sand und Schott GmbH

Templeton Emerging Market Fund

• Focus: Securities of corporations based d or with primary activities in emerging


Currency: USD

Issue date: 15.03.2004

Fund volume: USD 1.156 Mio. (EUR 870 Mioo.)

PProfit fit di distribution: t ib ti Di Distributed t ib t d

Issue surcharge: 5,54%

Administration fee: 1,60%

Total Expense Ratio: 2,61%

Dividend payout: 0,27 USD (01.07.2009)



Performance Volatility max. loss

1 month -4 -4,90% 90% 40 40,83% 83% -11 -11,98% 98%

1 year +34,07% 23,59% -13,63%

3 years -9,20% 31,58% -58,54%

Sharpe Ratio relative Return


Benchmark: MSCI EM


rel. monthly


-0 -0,12 12 -3 -3,12% 12% -3 -3,12% 12%

1,37 -3,80% -0,32%

-0,72 -15,30% -0,46%

Investor Sentiment Readings

• Opinion survey of individual investors rregarding

the market situation of the next

6 months

– Bullish: Expectation of an improvement

of the market situation

– Bearish: Expectation of a deterioration

→ Possible indicator of future performancce

of the market situation

→ Attention: Surveys and expectations ar

re subjective!


1. Each group will start with a virtual amo ount of 100.000 $.

2. Not invested funds will be yielded with the call money rate of 3%.

3. Only the repurchasing prices of the following

day are considered for buy or sell


4. Short sales are permitted (Long/Short-Strategy)

but only to the amount of the

respective depot value value.

5. The whole value of borrowed stocks foor

short sales has to be deposited at the


6. 100$ of transaction costs will be chargged

for each buy/sale. Transaction costs will

be charged double in case of a long too

short respectively short to long change.

77. Leverage is not possible. possible

8. The trading period will be from 07.07.22010

till 11.05.2011.

9. Dividend distributions will be reinvesteed

without transaction costs on the following g

day, except in the case of a sell signal by the trading system on the dividend

distribution day.

Possible strategies

See Excel example

Assessment criteria

1. Return of the trading system at the end d of the trading period

2. Sortino-Ratio

Return and Risk of the trading system are to be considered.

Thank you for y your y attention!


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