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How do you teach students the nuances of portfolio management? How can you
teach them about the impact of market fluctuations on a $1 billion dollar portfolio?
Wharton's OTIS is a tool for teaching students a set of financial management skills.
The application underscores several key concepts taught throughout the course:
- Portfolio balance and diversification— how portfolios are constructed
and how to keep them balanced given the vagaries of the market.
- Benchmarking — many funds are built and measured against a standard, allowing investors
to see how the fund is doing in comparative terms. Fund managers strive to show better performance
than the benchmark; students running OTIS seek to outperform the S&P 500.
- Liquidity — the mechanics of constructing the desired type of portfolio,
strategies for entering and exiting the market, and the need for cash on hand.
- Pricing — funds have the potential to move the market with their buys and sells;
students must learn how dramatic changes in the composition of their funds may affect the market as a whole.
- Sector Analysis — creating industry sectors and assessing the relative
returns of securities within and across sectors.
- Short Selling — learning how to use various types of trading orders, including short selling and stop limits,
to profit from market declines as well as increases.
- Margin Trading — understanding the mechanics, risks, and requirements of margin trading.
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