Equity Project

The team projects are designed to reflect the potential professional environment in which students in finance find themselves after graduation.

In order for the team to be productive, the objectives of the team and the responsibilities of each member must be clearly defined. For each project, the team is encouraged to break the project down into distinctive tasks (gather data, data entry, data verification, regression analysis, interpretation, word processing, etc), to assign clearly specified tasks to each member, and to meet on a regular basis to ensure that these tasks are completed. Each member should be able to understand the project as a whole and how each component of the project fits into that team effort. Each team member should be able to explain clearly and succinctly why and how each task was performed and to understand why and how tasks were performed by other members of the team.

  • The Project Description specifies minimum requirements for a project to be acceptable for submission
  • The raw score out of 40 then depends on how well the project presents and communicates key concepts and findings. Grades are thus granted on a "relative" basis.
  • Target audience is a sophisticated individual but not a sophisticated investor (non-finance background); don't use financial or statistical terms and tools without explanation and interpretation.
  • Use standard format, double spaced, 12 point font, and 1 inch margins.

Submission Requirements

A group submission consists of:

  1. A typed report together with an executed group assignment contract which is handed in to your instructor by the date and time specified in the course schedule. The report consists of the cover page, executive summary, body, and all appendices, in that order. Each section of the paper should have a heading; there is no need for a table of contents.

    Print the report on standard weight paper and staple it in the upper left corner.
    • DO NOT bind the report,
    • DO NOT place it in a laminated folder,and
    • DO NOT add fancy covers or other paraphernalia.
  2. ONE Word file (*.docx) that is the ENTIRE written report, and
  3. ONE Excel file (*.xlsx) that is all of your data and statistical work, submitted electronically.

    Electronic submission is activated from the Project Information page of the course website.

Document Preservation


The project will not be accepted or graded unless it includes

1. The engagement contract in the form of the original Value Line page for your company that you were given as the project assignment,

2. A group assignment contract signed and dated by each member of the group.

3. Electronic submission of the entire report in one word file with the data submitted as one excel file.

Research Ethics

Remember that your target audience is a potential investor; a well educated person sophisticated enough to want to manage his own investments but not trained in finance. This means you will need to explain the meaning of financial terms which might not be familiar to the general population. Try reading your report to a colleague in another college. Whenever you need to explain something verbally this is an indication that your report is not clear.

Remember that a financial report is not a mystery novel. Although you begin by gathering data, reducing this data into information, and then finally coming to a recommendation, the report should begin with your recommendation, why you came to that conclusion, and then presentation of your supporting evidence.

Finally, readers of your report expect value added. You are not providing a search engine report of the work of others with hundreds of footnotes or a clipping service. A report is not a compilation of information but the presentation of that information in a smooth coherent report. Put the pieces together, judge, draw conclusions. Give the reader the benefit of your insight and judgment. Then give the reader a professional, easy-to-read presentation.

Make sure that embedded graphs are well labeled and large enough to be comfortable to the reader. The fonts within the graph should match the surrounding text. Place graphs within the text that discusses what it means to the investor. Then put a full page version of the graph in the appendix. Tiny graphs surrounded by a sea of white space irritate the reader almost as much as the does the calisthenics workout that results from the constant suggestion that he “see appendix x”.



Information is derived from sources. These sources must be appropriately footnoted and referenced throughout the report. Footnotes should be at the bottom of each page where citation is made. The point to a reference is that if the reader questions the information, the reference gives sufficient information to go directly to the original source. A word of caution, information on a web page is as durable as the server it is stored on, print sources are more lasting. We will use the Chicago/Turabian style of footnotes throughout the paper. This is a professional report: use references not a bibliography or works cited page.

  • Valid sources include
    • Bloomberg
    • Capital IQ
    • Company Prospectus on EDGAR
    • Corporate Website
    • Earnings.com
    • Finance.Yahoo.com
    • FINRA
    • Mergent, S&P, or Fitch Ratings Guides
    • Mergent Online
    • Value Line

Wikipedia, investment research websites, and the course text book are not valid sources for this project. If you find that you need to copy from the text book then it means that you don't understand the concept well enough to explain it to a non-finance major.

All graphs included in the report must be generated from retrieved data and your own calculations. Simply pasting graphs from Yahoo!, CNBC, or the Federal Reserve is not acceptable.

Sources of information (Library)

The Business and Economics Library provides an extensive list of web sites of Investment data and information.

  • Search Strategy for U.S. Company Information map (blue links indicate Internet addresses; red links indicate sample pages of the print resource in the Business and Economics Library,-ask library staff for its exact location).

  • Value Line. Make sure you use the industry profile page as well as the company profile.


The following outlines the requirements of the paper. Make sure that you don't lose points unnecessarily by failing to follow simple instructions.

When you are required to include specific statistics in the project report, embed a table. The text of your report can then discuss what these statistics mean to the reader as an investor rather than being a listing of key statistics.

(1 page - 5 points)

These points are allocated for the overall quality of the report. This is the category under which you will see deductions for incorrect/incomplete citation, poor coordination between sections, and lack of professionalism in presentation.

  • Make sure that your title page identifies
    • the name and ticker symbol of the company you are analyzing,
    • the names of all the members of the group (correctly spelled and in alphabetical order),
    • the name of your professor (correctly spelled), and
    • the date of submission

Executive Summary
(1 page - 5 points)

The executive summary is designed for an investor who reads only the first page of the report. Since he is reading only the first page of the report the executive summary should never be more than one page. This section should present your principal findings and recommendations in a straightforward and easy-to-read summary. The Executive Summary is the first page of the report (beneath the cover page), but it is the last page you should write.

(2 pages - 5 points)

This section includes a one-page description of what the company does, and a one-page analysis of how well the company does it.

In the first page of the introduction provide the name and principal characteristics of the company, and the environment in which it operates. This information includes the company's relative size, market share, asset value, and importance in the industry. Discuss the principal difficulties the company will have to overcome and possible opportunities it might be able to seize over the next year or two.

In the second page of the introduction report your group's analysis of the assigned company's corporate financial statements and company specific information.

Beta Calculation
(2 pages of text - 10 points)

This section is one of the core components of this project, and is weighted accordingly. You are not expected to teach statistical analysis and/or linear regression interpretation, but need to have a clear understanding of the data manipulations you are asked to perform in order to interpret and explain your results to the target audience. The way you explain and interpret the data is the value added in your report. Do not make this a step by step description of what you did, but an analysis of what this means for the reader's potential investment.

Use the regression output to explain the inferences and reliability of your calculations.

Retrieve month-end closing stock price and market proxy index values from Yahoo!finance, along with relevant dividend information from Earnings.com to calculate the rates of return to be used in the calculation of the regression Beta (ß) coefficient. Make sure that you footnote the data source in the excel spreadsheet.

Calculate the Beta (ß) coefficient (systematic risk) of your company using the previous 36 monthly rates of return ending January 31, 2018 for your assigned company based on the market returns. Market returns are the independent variables (plotted on the X axis), and the assigned company returns are the dependent variables.

Use the S&P500 as the market proxy. The analysis should include the output of the regression analysis, the derived regression equation, and a graph of the characteristic line. Further, the analysis should explain and interpret the results of your analysis in terms of what it means to the potential investor. (Place the MS Excel output and statistical data in appendices.)

The analysis of the regression results should also compare the Beta (ß) coefficient that your group calculated with a reported Beta (ß) coefficient published in the acceptable sources for the project. Your group needs to be able to explain why your group’s Beta (ß) coefficient may differ from the published Beta (ß) calculated by other sources. When discussing the reasons for the difference between your group’s calculated Beta (ß) coefficient and the published Beta (ß) coefficient, your group should investigate the possibility that the other sources may have used a different market index proxy, a different time period, and/or different time period.

When interpreting the results of your regression analysis, use the Security Market Line as the fundamental guide to assess the investment returns of your company’s stock in relation to the stock’s systematic risk. Use the 3 month T-Bill rate (FRED series TB3MS) as the proxy for the risk free rate. Highlight any abnormal returns and include it in the overall buy-hold-sell recommendation.

When discussing the research methods and choices, your group should address some basic issues. Have the overall returns been positive? What characteristics define the risk-free rate as risk-free? Does the variance of the returns for the risk-free proxy over the same period have any relevance to investment risk? Leave the reader with the confidence that you have covered the risks he might face as an investor.

Present the results of your calculations as an SML graph with your company returns clearly plotted.

Include a high-low-close graph of the assigned company stock price for the previous 36 months ending January 31, 2018.

Include in the Appendices the raw data driving your analysis, such as dates, prices, dividend amounts/timing, and your calculated monthly returns, including the mean, standard deviation, and other relevant statistics of these returns.

(2 pages of text - 10 points)

Diversification is the other core component of the project. It requires concise, constructive writing to accomplish the goal in the limited space suggested. Use a logical, not a statistical, approach to choosing a diversifying company. Then use statistics to assess that choice as a diversifying stock. Bear in mind that recommending the purchase of a diversifying company’s stock simply to diversify without regard to investment performance of it is a recipe for creating unhappy clients.

Propose an investment in the stock of a company that might be used to diversify a portfolio that includes your assigned company. When conducting research for a possible diversifying stock, look for a company that is affected by different industry and/or company specific dynamics; where you expect the returns to have weak or perhaps even negative correlation with your company’s returns. Think about what your company does, and what impacts its successes and failures that are beyond its control. Try to find a company where drivers of success or failure beyond its control are different.

Once you choose a potential diversifying company, use month-end closing prices and dividend information over the same time period as your subject company to create the same 36 monthly rates of return. Review this return data and the company’s strengths and weaknesses for potential pitfalls. Even if the diversifying company’s returns are uncorrelated with the returns of the assigned company, recommending purchase of a company on the way to bankruptcy court does not make clients happy, or show much investment knowledge on your part.

Report the logic used in choosing this diversifier, and examine the following characteristics; the mean return (µ), the standard deviation (s) of the returns, and the Beta (ß) of the following four portfolios:

    1. 100% your subject company,
    2. 100% your diversifying company,
    3. 50% your subject company, 50% your diversifying company, and
    4. the minimum variance portfolio (MVP)

In order to generate the above data, you will need to run four different regression analyses and calculate four different Beta (ß) measures, all over the same time horizon, and all using the same market proxy. Your analysis should also calculate, report, and discuss the correlation coefficient of the two companies in the portfolio as one measure of success in the diversification process.

Present the monthly returns and appropriate statistics in clearly defined and labeled appendices.

Interpret the return performance and the coefficient of variation for the various strategies and determine whether the minimum variance portfolio investment strategy has improved the future investment prospects based on the team’s investment research methods and the possible implementation of the team’s diversification strategy.

Include a table reporting the mean return (µ), the standard deviation of the returns, the Beta (ß), and the coefficient of variation for a 100% investment in each stock in the portfolio, the 50/50% portfolio, the S&P 500 Index, and the minimum variance portfolio.

(1 page of text - 5 points)

The conclusion section of the project should draw an investment conclusion based on the business’s performance, the stock price performance, and the team’s investment research methods and the possible implementation of the team’s diversification strategy.

This section is where the report all comes together. If you have done a good job on the Introduction, Beta (ß) Calculation, and Diversification sections, then the conclusion brings all of the theory and findings (quantitative and qualitative aspects) together to recommend purchase, sale, or hold of this company’s stock for a suitable investor.

One of the critical admissions in a report making recommendation of purchase or sale of an investment is the disclaimer of using historical information to form expectations of future performance. This section should not be written by an attorney, but finance professionals need to remind the reader that models in finance are built on key assumptions. When assumptions are not borne out during holding periods, resulting returns can be quite different than expectations formed using models. The data you analyzed may or may not be representative of future expectations, illustrating the art rather than science of investment selection.


Data and calculations should be in the appendix, and presented in user-friendly form. Don't just hit the print button. Spend some time making sure that the appendices are properly labeled and that the font is consistent and easy to read. Full page graphs and minimizing the white space on pages adds value, the number of pages does not. If you want to extract key components of your data and present it as a small table or thumbnail sketch within the body of your paper, it is your choice so long as it improves the presentation. This does not relieve you of the need to have the full scope of your quantitative work presented in the appendix.

Appendices should be consecutively labeled and presented (Appendix A - Rates of Return on XYZ Corporation for 36 months ending January 31, 2018), Appendix B - et cetera.

Excel Notes

Equity project Excel notes