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GSM Team Wins Bay Area MBA Portfolio Challenge

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(Davis, CA)—A team of four UC Davis MBA students recently won the CFA Society of San Francisco’s second annual Bay Area MBA Portfolio Challenge. Competing teams spent three months trading and tracking a $1-million portfolio using the Stock-Trak virtual brokerage investment simulation platform. Investments were limited to U.S. traded equities.

While most portfolios worldwide suffered record losses, the team of Bay Area Working Professional MBA students—Jeffrey Ngai, Srinivasan Ramani, Soyen Shih and Wayne Zhong —devised a strategy and execution of trades to make consistently positive returns, bringing to life the “Opportunity Made Everyday” motto of the stock markets. The team’s portfolio grew 363 percent, achieving a 10.56 Sharpe ratio, which measures reward-to-risk.

The team attributes its success to a disciplined and effective risk management strategy.

“Although the market had declined about 30 percent during the first 10 months of 2008, when the challenge began in mid-October, we thought it still underestimated the severity of the recession and overestimated the effectiveness of the federal government’s aid to the financial industry,” noted Wayne Zhong. The team used half its capital to short the market, betting correctly that that the financial and retail sectors would fall.

With market volatility at an historical high, they put the rest of their capital to work with a disciplined strategy to day-trade the leveraged market index ETF and take advantage of the intra-day market movement. Daily picking one or two market trends and making one or two well-researched and sizable bets, the team made more profitable trades than losing ones. “In the long run,” explained Zhong, “one or two percents gain per trade added up to a nice increase.”

Twenty-two Bay Area b-school teams—including three from UC Davis and teams from UC Berkeley’s Haas School of Business, Wharton West, San Francisco State University and Mills College—competed in the challenge.

The team’s faculty advisor was Associate Professor Joseph Chen, who taught an investment analysis course in the School’s three MBA programs last fall. One project gave the students experience estimating capital market assumptions and optimizing stock portfolio—valuable lessons that helped propel the team forward in the competition.

The team won “Bay Area bragging rights” and passes to CFA Society of San Francisco professional development meetings to hear the seasoned insights of investment industry leaders. The society’s more than 2,900 members include investment professionals at Bay Area banks, insurance companies, investment counselors, brokers, public agencies, universities and corporations.

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