Student Investment Fund
The objective of the FSU COB Student Investment Fund (SIF) is to enrich student education through active participation in financial markets. Students assist in stock selection and management of a real portfolio, thus gaining hands-on money management experience. They learn to deal with the uncertainty inherent in the process of estimating stock value and contrasting it to current stock price. The process helps students to develop their intuition and provide a practical application for investment decisions.
The COB Student Investment Fund comprises three investment groups
Long-Term Investment Group
The objective of the Long-Term Investment Group is to buy securities that are believed to be currently mispriced and have positive future prospects and sell those that are thought to have negative future prospects. The group employs a discounted cash flow model developed and modified by its members to determine if the markets are under- or over-valuing a given asset. Investments suggested by this group are usually considered for longer holding periods.
Short-Term Investment Group
The Short-Term Investment Group focuses on near-term events and attempts to take advantage of mispriced securities brought about by investors’ irrational beliefs and trading patterns. Some examples of the techniques used are: Post-Earnings Announcement Drift, Momentum, and Overreaction (as defined by Debondt & Thaler). This group is also assigned responsibility for derivatives trading the spring semester.
The Arbitrage Group is primarily focused on identifying mispricing in the spread between two securities and arbitraging the difference. Mergers often provide these opportunities through remaining knowledgeable about recent announcements, news about regulation that may hinder the merger’s success, and the implied probability of deal failure captured by market pricing. Other investment opportunities include pairs trading, long/short sector allocation, industry and/or country over- or under-weighting, etc. The Arbitrage Group strives to maintain a small basket of several positions at a time in the hopes of benefitting from diversification.