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Your assignment is to write two reports as described below. Each report has a
weight of 0.5 in the grading. However, both reports must pass in order to pass the
exam. Post your reports at Canvas as one single document (Word or pdf). Also, post
(separately) an Excel file containing the data (time series) that you have used in your
analysis. Do not write your name on the document, only your candidate number.
The two reports put together must not exceed 25 pages (line space 1.5;
font size 12), including front pages, executive summaries, graphs and tables.
You may write your reports in any of the Scandinavian languages, English, or German.
This is an “open book” exam. You may use textbooks, PC, lecture notes etc.
However, the reports shall have one and only one author. If two (or more) reports
resemble each other to a large degree, this will result in a lower grading. If two reports
are very similar, none of these will pass.
You may assume that the readers of the reports are familiar with statistical and
econometric concepts and methods. Likewise, the readers are well educated in
finance. Hence, there is no need to go into details as regards well-known financial
concepts or methods. Although a brief introduction to concepts, methods and
theories may be required, basic textbook stuff should be minimized. The reports
should mainly deal with the financial and economic issues, problems, empirical results,
and conclusions.
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Report 1, Fund construction

It is April 1, 2014. You have just been hired as analyst in the Strategy and Innovation
Team at Hexagon Capital Management (HCM).

The CFO of HCM is contemplating to launch two new mutual funds investing in
stocks traded at Oslo Stock Exchange.

(1) A fund called the “Tracker”, which is to be marketed as a highly concentrated

fund tracking the OSEFX quite close. “Concentrated” means that the fund shall
consist of quite few stocks (the CFO suggests 6-8 stocks). The idea is to
market this fund as very transparent and a fund where the investor can easily
follow the development of each stock.
(2) A fund called “HRR Active” (short for high return, high risk). The fund is meant
to be marketed as one that shall beat its benchmark (the OSEFX) by taking a
calculated relatively high risk when choosing companies and sectors
(industries). The fund may consist of a relatively large number of stocks.
However, the stocks should be among the 50 largest at OSE. The fund is long-
only.

Based on the information you have available at that time (April 1, 2014), present
your proposal for how “Tracker” and “HRR Active” should be constructed.
Needless to say, you have to explain clearly what lies behind your
recommendation and why you think that the goals of the two funds may be
achieved by following your advice.

.
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Report 2, Fund performance

We are now in November 2019. You are still with HCM. The CFO back in 2014 is
retiring and you have applied for her job. As part of your job application, you refer to
the report you made in April 2014. In your opinion, the 2014 report was quite an
achievement, and you were quite disappointed when HCM decided not to go ahead
with your recommended funds. As part of the recruitment process, the Board at HCM
has found your 2014 report in their archives and given you the following assignment
to go along with your job application:
“Write a report on what would have happened if HCM in 2014 had opted for your
proposals. What would have been the performance 2014-2019 of the two portfolios
as proposed by you back then (assuming that no changes in fund composition were
made during this time)? How close would “Tracker” have been to the OSEFX
benchmark and would “HHR Active” really have beaten this benchmark? In hindsight,
how would you have improved your 2014 proposal?”