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Ready, Set, Trade! CNBC’s MBA Face-Off

CNBC MBA Challenge.jpgSaurav Sen (MBA ‘12) picked the sort of stocks that wouldn’t keep him up at night fretting about the economic drama playing out in Greece. Even so, during his waking hours, Sen couldn’t stop himself from logging in and constantly checking the performance of his $1 million portfolio.  

So what if it was virtual money? After all, he and nine teammates at the Tepper School of Business were playing in the CNBC “MBA Face-Off,” a competition that tested the trading prowess of students at eight top business schools.

The Tepper School team consisted of Ocean Dalton, Max Egan, Matthew Gleason, Matthew Jacobs, Rupesh Kalaria, Samir Karim, Caitlin Kelly, Van Morgan, Cinmay Parkh, and Saurav Sen. Additional information is available on the CNBC Profile Page.

The Tepper team competed against MBAs from Cornell, Georgetown, Ohio State, the University of Chicago, the University of Michigan, Notre Dame and the University of Texas at Austin. The business school contest began on Sept. 19 as part of the business news network’s popular “Million Dollar Portfolio Challenge.”

“We launched this new component since we were eager to showcase some of the best and brightest minds that are currently studying in some of the nation’s top business schools. The idea being was to give students the opportunity to test their market prowess and knowledge in a fun and competitive way, while contributing their thoughts on current business and market related news. You never know…some of the participants may even be future on-air guests of our network,” said Stacy Eisner, director brand marketing at CNBC.

At the end of trading at 4 p.m. EST on Nov. 25, the team with the highest average stock portfolio won, netting each member an iPad 2. Market volatility throughout the program saw team switching positions frequently. The Tepper School Team had an early lead and rode the market to an eventual 5th place finish at the closing bell - with a very respectable and profitable performance.

The Tepper team’s identified their strategy as trying to neutralize the market volatility caused by the ongoing European economic crisis by picking “market-neutral stocks.”

“Our goal was to make a little bit of money every day,” said Max Egan (MBA ‘12). “In that part, we were successful.”   

Egan and others on his team used a quantitative screen to compile a list of stocks that seemed like solid performers based on factors such as risk characteristics, analyst estimate revisions and momentum. They then narrowed down the short list to arrive at their individual picks.

Members coordinated their picks to minimize losses and concentrated their selections in corporate America.

“If anyone is going to spend money now, it is corporate America rather than the consumer base,” Sen said.

Egan hung on to a stock called Spreadtrum Communications Inc., a Chinese telecom equipment manufacturer that lost 20 percent at one point but rallied to gain 40 percent in total. He didn’t have the same success with Jazz Pharmaceuticals Inc., whose shares fell after the Food and Drug Administration admonished it for failing to report adverse side effects of a drug.

“It is definitely humbling. “You never really have access to the inner workings of companies,” said Egan, who would run into some of his competitors from other schools during job interviews.

Other teams played directional markets by trading volatile leveraged index Exchange-Traded Fund (ETFs), a strategy that the Tepper team generally avoided. As their standings rose and fell, team members blogged about their experiences on the CNBC site. Their musings were by turns exuberant, chagrined and philosophical.

Midway through the competition, Sen reflected in a post: “People are investing in binary bets on geopolitical events. This is a complex game. Take Europe.  Sure, there is a plan to have a plan -- but who will make the plan? This is an Organizational Behavior -- Financial Economics, mishmash case-study nightmare.”

The Tepper team has so far steered clear of that nightmare. But all bets were off during the final hours of the contest, when teams tend to take extravagant risks to leapfrog to the top of the heap. Each team is playing for first place.

“You go for it,” Egan said. “The world ends at the end of the contest.”


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MBA Face-Off, part of CNBC’s Million Dollar Portfolio Challenge

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Mark D. Burd

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Tepper School of Business
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mdburd@andrew.cmu.edu
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