The Startup Game provides a fun and interactive way for students to learn about the process of forming a company, focusing on valuation, determining appropriate employee mix, and questions about retention of equity. Students receive a role before class starts, with supporting information based on the type of role.
The Raise Allocation Interactive Salary Exercise (RAISE) application focuses students on allocating a salary raise pool among seven employees, providing hands-on experience in the role of corporate managers who must allocate limited resources. Within the simulation, students make decisions about which employees will receive a raise based on quantitative and qualitative performance measures as well as a host of demographic characteristics about each employee.
Wharton’s International Exposure Management and Valuation (IEMAV) simulation puts students in the role of an international Chief Financial Officer and presents them with multiple scenarios, each highlighting a different source of cash flow currency risk. For each scenario, the student (or group of students) receives background information about a company and the specific risks faced.
The Long Horizon Return Simulator (“Horizon”) allows students to simulate long-horizon returns based on historical monthly return distributions for various asset classes. The goal of Horizon is to help students address investment portfolio decisions relating to shortfall risk and asset allocation across asset classes.
Faculty Author: Robert Stambaugh
Students can test an investment strategy over prior time periods by using historical data.
Backtesting is the process of testing an investment strategy over prior time periods by using historical data. The Backtester application is a simple backtester developed to reinforce academic investment concepts without the complexities and the costs of a commercial backtesting product.
Backtester has two major functions:
Students create an investment strategy by using Backtester’s wizard interface. The wizard guides students through the process of defining a backtest’s attributes that will be saved and executed at the user’s convenience. Once the test has been run and results have been generated, the students can use various analytical tools to review their outcomes.
When students log into Backtester, they can either choose to view the results of a previously run test or they can create a new test. Clicking the add button initiates a wizard interface that will guide students through the process of defining test parameters.
Students can control various aspects of their backtest depending on their goals and the class assignment. These variables include the name of the test, start and end dates, number of securities per portfolio, type of portfolio weighting, and re-sort frequency.
By default, all available securities will be considered for inclusion in the backtest unless the student narrows the list by adding one or more screening criteria. Backtester screens act as filters for the security list and are based on metrics such as market cap, book to market ratio, price to earnings ratio, lag returns, and price.
Backtester contains four portfolio analysis screens that help students decipher the results of a test: summary, values and returns over time, rate of return over time, and security count over time.
The summary screen recaps the test’s parameters and displays performance information about the specific portfolios generated by the test. It also includes several useful tools:
Values and Returns over Time
This graph shows monthly values and returns for each portfolio over the life of the test.