Investing is an art as well as an imperfect science. The intricate juxtaposition of research, timing, incomplete information and John Maynard Keynes's "animal spirits" makes it difficult for even the most notable investors to return a profit, especially given the diffuse peaks and troughs of the economy over the past decade.
Surely then college, even graduate, students don't stand a chance. Don't tell that to Daniel McAllister, a 28-year-old MBA candidate at the University of San Diego School of Business Administration.
McAllister finishes first overall in the inaugural Institutional Investor All-America Student Analyst Competition. A former intern and financial analyst at Jack in the Box corporate headquarters, McAllister is no burger-flipper. He admits to changing his notions about investing to better suit the competition, which ran from September 10 through January. Though a believer in value investing over technical analysis in the long run, McAllister addressed the short-term nature of the contest by adopting a strategy much more prevalent in investing today he went algorithmic.
||Carnegie Mellon University|
||Florida Atlantic University|
||Florida International University|
||George Mason University|
||Loyola Marymount University|
||New York Institute of Technology|
||Pennsylvanie State University, Erie|
||San Francisco State University|
||St. John's University|
||Texas A&M University|
||University of Akron|
||University of California, Berkeley|
||University of Florida|
||University of San Diego|
||University of Texas at Austin|
||University of Texas at Dallas|
||University of Virginia|
Utilizing a very different strategy, University of Virginia undergraduate Matthew Olfat constructed a portfolio that would make famed hedge fund manager and UVA alum Paul Tudor Jones II proud. Olfat, a 19-year-old systems engineering and financial math double major, took a macro approach, using exchange-traded funds to play the broad market and go in and out of sectors.
The stark differences in background, strategy and execution of these top competitors stand to highlight the ongoing question of just what is the right approach for young people coming out of school into the world of finance and investing. As rapid-fire trading, as opposed to buying and holding, has taken over the professional world, finance students are forced to consider or reconsider what makes them valuable assets as they look to join the workforce.
The II All-America Student Analyst Competition has provided an opportunity for students with a nose for investing to test their mettle against like-minded participants from around the U.S. The investing platform, AlphaSeal, was created by Stamford, Connecticutbased Mark My Media and seeks to represent a professional trading environment. The cloud-based system creates a personal portfolio for each competitor, tracking the equity value, net asset value, and profits and losses on a daily basis, and marking to market all positions, as a prime broker would. To determine the overall ranking, II and Mark My Media compiled analytical data on six investment factors: net benchmark outperformance, volatility, balance sheet impact, net exposure impact, long alpha and short alpha.
Students started their portfolios with $100,000 each and had to follow Regulation T, the Federal Reserve Board rule designating a 50 percent margin requirement on initial stock purchases. They were then free to trade in any of the seven industry sectors Basic Materials, Capital Goods/Industrials, Consumer, Energy, Financial Institutions, Health Care and Technology, Media & Telecommunications. The trading books were maintained in a dedicated server that sits in an SAS-70 security-rated co-location facility similar to those financial institutions use.
Overall, 34 colleges and universities participated in this contest, totaling just under 700 students and covering the U.S. from the University of California, Berkeley, to Florida International University. The competition was open to both undergraduate and MBA students, offering a limited but notable view into the value of an advanced degree in finance.
Thirteen of the top 100 students overall come from the Zicklin School of Business at Baruch College/City University of New York, home of the state-of-the-art Wasserman Trading Floor. Drexel University in Philadelphia is second, with 11 competitors in the top 100, followed by the McCombs School of Business at the University of Texas at Austin, which has nine students who make the cut. Winners from all three are in undergraduate programs. Two MBA programs slot seven and six students, respectively: New York City's Fordham Graduate School of Business Administration and Cornell University's Johnson Graduate School of Management in Ithaca, New York. Seven of the top ten students overall are currently working toward their undergraduate degrees, as are 60 of the top 100, though, to be sure, a little over 70 percent of competitors are undergraduate students. A Bayesian inference analysis, a statistical method in which evidence is used to derive probability, shows that graduate student competitors were 9 percent more likely than undergraduates to rank in the top 50 overall or top five in any of the sector or factor rankings.