The course would provide understanding of theoretical concepts in the field of investment management and how these theories applied in real life. Students would learn how to use the concepts they have already learned in Accounting, Financial Management, and Macroeconomics courses in investment management. For investment management, financial assets can be grouped into major asset classes: Equities, Fixed Income Securities, and Derivatives, Alternative Investments (Real Estate, Venture Capital, Private Equities, and International Investments etc.). In this course we will focus on Equities.
The subject would help in structured thinking about how surplus capital is invested to generate adequate return by investing in equity markets. We will cover the following topics in the course: asset allocation, portfolio optimization, asset pricing, portfolio management, market efficiency and behavioral finance, portfolio performance measurement, valuation of stocks, and equity research.
II. Student Learning Outcomes (typically 3-5 bullet points)
There are few important learning’s one can expect to learn from this course.
1. Learn to use the macro economic variables to identify appropriate equities to invest 2. Learn to use the financial statement data to identify appropriate equities to invest 3. Learn to create and measure the performance of a portfolio from risk-return dimensions
III. Required Text Books and Reading Material
IV. Tentative Session Plan
In these 4 sessions, we will study some of learning from macro economics that can be used while making investment decisions. We will study the effects of fiscal, monetary policies on overall investment scenarios. In addition to macro economics factor we would discuss the industry structure and its implications for the company’s future prospects. Besides we would discuss the implication of business cycle on investment decisions.
Reading Material: Chapters 17 of BKMM
Session 5&6: Investment Strategy
These two classes will discuss how human psychology affects individual’s behavior of investment, and how they get translated to extreme market behavior. As an intelligent investor how would you use these extreme behaviors to sharpen the investment strategy?
Reading Material: Will be discussed in the class.
Days 7&8: Basic Principles of Stock Valuation
In these two sessions, we will study some of the stock valuation model. Some of the model we would discuss in detail are, Dividend Discount Model, P/E multiple model, and Free Cash Flow Models. Focus of these classes will be to discuss inputs that will go into valuation.
Reading Material: Chapters 18 of BKMM
Session 9-11: Financial Intelligent: Interpreting the Publicly Available Information to Make an Intelligent Investment Decision
In these three sessions, we will study how investor and fund manager should look at the financial statements to identify undervalued stocks.
Reading Material: Chapters 19 of BKMM, and Various Annual Reports of the companies discussed.
Session 12&13: Class exercise and presentation
The class will be divided into groups and each group will be given a company to study in detail. Everyone should do their own analysis; it would be nice if the group members share their thoughts to enrich each other’s understanding. One student (randomly chosen by the instructor) will be asked to share the analysis of the group with the class, where as other group members can participate in the discussion.
In this session we will study how measurement of risk and return of an individual asset is different from risk and return of a portfolio. Once we would introduce these measurement matrices, we would prove how diversification helps to reduce overall risk of the portfolio. In this session we will study the problem of asset allocation and how investor uses the risk-return matrices to make that choice. We would derive the Capital Allocation Line and discuss the separation principle which would be used in our latter sessions.
Reading Material: Chapters 4 of EG and Chapters 7 of BKMM
Session 16: Choosing the Optimal Risky Portfolio & Index Model
In this session we would study how an investor chooses the risky portfolio. We would study the Markowitz portfolio theory and derive the efficient frontier which helps the investor to make an optimal choice. Once we derive the optimal portfolio we would study the index model to price the risk for the efficient portfolio.
Reading Material: Chapters 8 of BKMM and Chapter 5 of EG
Session 17: Equilibrium Asset Pricing Model: CAPM and Enhancement to CAPM
In this session we would study one of the most popular asset pricing models and its enhancements. In these two sessions we would study the usefulness of the CAPM in details.
Reading Material: Chapters 9 of BKMM and Chapter 13 of EG
Session 18: Arbitrage Pricing Theory (APT) In this session we will discuss APT and its application.
Reading Material: Chapters 10 and 11 of BKMM
Session 19: Portfolio Performance Measurement & Active Portfolio Management In this session, we will study the different tools that are used to assess the performance of the portfolios and who would one use this tool to actively manage the portfolio.
Reading Material: Chapter 24 of BKMM
Session 20: Market Microstructure and process of price discovery and implication for Operational Efficiency of markets
In this session we would understand the process of arbitrage and its implications on theory of one price and how arbitragers play a role in price discovery process. Besides role of the market efficient hypothesis on investment decision making process would be discussed.
Reading Material: Chapters 12, and 13 of BKMM
V. Evaluation
The Table below is self-explanatory on the evaluation criteria of the course.
Group Assignment will involve analysis of a company (name of the company would be provided to you). It will be evaluated on the basis presentation made by the group inside the class. In addition to the presentation the students need to submit a 5-page report in support of their presentation. The quiz would be of MCQ type with negative marks, and end-term would test the conceptual clarity and understanding of the subject and will cover the entire syllabus.
VI. Academic Integrity and Discipline
You must demonstrate high order of academic integrity being attentive in the class and regularly read the prescribed reading material. In case of group assignment, all members of the group should contribute to the preparation of the report and you are expected to write the report in your own style and language. Your basic purpose should be to learn, without resorting to any unfair means for getting a higher score/grade.
Students are not allowed to use cell phones and computers inside the class room. Once identified the instructor may ask the student to leave the class immediately. Students are expected to come to class prepared with the assignment given by the instructor time to time.
Created By: Alora Kar on 11/20/2018 at 09:52 AM Category: MBA(Exe.)2018-19 T-III Doctype: Document