University of Southern California

Smart Investment
Marshall Prevails Over 23 Top Schools in CQA Investment Challenge
May 19, 2014 • by News at Marshall

A team of undergraduates from the USC Marshall School of Business took first place in the national Chicago Quantitative Alliance (CQA) Investment Challenge on May 2. Joseph Bailey ’14, Simeon Lee ’14 and Dikshant Tahilramani ’14 (members of the Undergraduate Student Investment Fund class) and Daxiang Tian ’14 represented USC Marshall and competed against 23 top-ranked schools, including Carnegie Mellon, University of Chicago, Dartmouth, UCLA, University of Michigan and Vanderbilt.

The CQA Investment Challenge is an equity portfolio management competition organized by the CQA, a professional organization for investment managers, academics, plan sponsors, consultants and other investment practitioners. The student investment teams were guided by faculty advisers and mentored by investment professionals.

Starting in November 2013, the teams created and managed a virtual hedge fund over five months, simulating the duties of fund managers. The goal was to generate superior risk-adjusted returns with a long-short equity investment strategy.

“From Oct. 31, 2013, to March 31, 2014, the USC CQA competition portfolio achieved an absolute return of 9.78% and a risk-adjusted return (as defined by the Sharpe Ratio) of 3.08,” said student adviser Suh-Pyng Ku, professor of clinical finance and business economics at the Marshall School of Business and the instructor for the Undergraduate Student Investment Fund.

Before the official start of the competition, the students developed, back-tested and finalized their investment strategy for a long-short, market neutral portfolio. After much discussion and research, their investment strategy was to implement a multi-factor model that focused on four risk factors: value, momentum, volume and revenue. The basic idea was to generate risk exposures that could deliver superior returns.

“The team extensively researched market anomalies and back-tested them to create a unique quantitative investment model,” said Tahilramani. “The competition was demanding and competitive, but above all it created a great learning experience, in which we are proud to have represented USC.”

In addition to being evaluated on absolute return and the risk-adjusted return, the students were also graded on two written reports, the investment strategy report at the start of the competition and a client report at the end.

“I am most happy to see the students being able to capitalize on the theories, practices and research papers they have been exposed to and to implement their strategy in a consistent and disciplined manner,” said Ku.

The group was mentored by Dr. Jia Ye, chief investment strategist at First Quadrant. “I was extremely pleased to work with such conscientious and smart USC students,” said Ye. “It was very rewarding to learn that USC won the competition.”

This was the first time USC Marshall participated in the CQA Investment Challenge. The team will receive a $1,500 grand prize, and the students’ resumes will be circulated to all CQA members.

About the USC Marshall School of Business
Consistently ranked among the nation's premier schools, USC Marshall is internationally recognized for its emphasis on entrepreneurship and innovation, social responsibility and path-breaking research. Located in the heart of Los Angeles, one of the world's leading business centers and the U.S. gateway to the Pacific Rim, Marshall offers its 5,700-plus undergraduate and graduate students a unique world view and impressive global experiential opportunities. With an alumni community spanning 123 countries, USC Marshall students join a worldwide community of thought leaders who are redefining the way business works.