Fundamentals of Asset Valuation II
Lecture: Professor Frank Song
Text: Required:
Investment, Bodie/Kane/Marcus, McGraw-Hill.
References:
International Investments, 5th edition, Bruno Solnik and Dennis McLeavey
Investment Analysis and Portfolio Management, 7th edition, Frank K. Reilly and Keith C. Brown (Dryden, 2003)
Investment Fables, Aswath Damodaran, Prentice Hall, 2005.
Performance Evaluation
Class Participation, Home Work, 10%
Term project 10%
Midterm 30%
Final 50%
Total 100%
Syllabus
The course consists of following parts:
Part I. Mathematical and Institutional Background of Investment
This part will review basic mathematics and statistics in finance. It covers Probability, Regressions, and Calculus and Optimization. The institutional background includes Investment Environment, Markets and Instruments, How Securities are Traded, and History of Interest Rates and Risk Premiums.
Ch. 1- 5 and Quantitative Review of Bodie/Kane/Marcus.
Part II. Portfolio Selection Theory
This part will cover Risk and Risk Aversion and Portfolio Selection Theory.
Ch. 6-8 of Bodie/Kane/Marcus.
Part III. Asset Pricing Theories
This part will cover, Capital Asset Pricing Model (CAPM), Arbitrage Pricing Theory (APT), and Index Models. The empirical tests of the theories will also be covered.
It comes mainly from Ch. 9-11, 13 of Bodie/Kane/Marcus
Part IV. Security Analysis
It covers the macro and micro approach of equity analysis.
Ch. 17-19 of Bodie/Kane/Marcus; Ch. 16 of Reilly/Brown
Part V. Market Efficiency and Applications
This part will cover the theories and tests of market efficiency, behavioral finance, portfolio strategies, and portfolio evaluations. Cases and practical aspects of portfolio management will also be discussed.
Ch. 12, 24-27 of Bodie/Kane/Marcus and materials from Damodaran
Part VI Alternative Investment (if time permit)
This part will cover alternative investment instruments such as foreign currencies, real estate, hedge funds, and private equity funds.
Ch. 2-4, 8 of Solnik/McLeavey and handouts