Investments
Investments
Peking University HSBC Business School
Spring II, 2013 (fourth module 20012-2013)
Location/Time: C-125/1:30-3:20 M, W Instructor: Dr. Erik Benrud
Office Hours: M 4-5, Tue. 4-5 or by appt. Office: C-414
Tel #: 86-755-2603-3084 E-mail: ebenrud@phbs.pku.edu.cn
Objective: This course offers the financial theory and quantitative tools necessary for understanding how stock, bond prices are determined, and how financial assets are used for investment decisions. Topics covered include modeling the relation between risk and return, optimal portfolio selection based on mean–variance analysis, asset pricing models, money management, and more. Although stocks get a lot of attention, the course includes coverage of fixed income securities (bonds) and derivative securities (options, futures), and alternative investments (hedge funds) and how they combine to make up a well-diversified portfolio.
Required Materials: a time-value of money (TVM) calculator and access to EXCEL and the Internet.
Required Text: Bodie, Zvi, Alex Kane, and Alan Marcus, Investments, McGraw Hill, 9th Edition, ISBN: 0073530700, 2010 (BKM).
Approach: The course will consist of lectures, video representations, homework, projects, and discussions. Lectures will include discussions of current events or subjects I have assigned as research topics. Work in Excel will be part of the learning process. Many assignments will involve downloading data from the Internet and analyzing it in Excel.
Class Format: Most of the class time will consist of lectures and discussion of current events in alternative investments.
Practice Problems: I will periodically post practice problems that you should be able to work for the exams.
Assignments to hand in: These will be assigned at various times. They will be Excel problems, cases, and advanced problems. Late assignments will be penalized by a letter grade each day. When specified, you can work in groups of 2s and 3s. You can also work on your own.
Final Project/Presentation: Students will form in groups of appropriate size. Each group will recommend a portfolio allocation (for example 50% equity, 30% debt, 20% fixed income) and suggestions of specific assets to include. The presentation and report will describe and justify the recommendation. Presentations will be given in the classes that follow the exam.
Also, during the first 6 weeks, I will arrange for several showings of the films: Inside Job and Enron: the Smartest Guys in the Room. These are required and material from the films will be on the exam.
Grading: In-class work/participation 20%
Homework/Research 20%
Exam in week #7 40%
Presentations 20%
Course Outline and Readings
This is an approximate schedule of topics that will be covered. You should read the corresponding material in the text prior to the lecture. “BKM” refers to the book by Bodie, Kane and Marcus.
Week One – Risk and Return; Asset Pricing and Present Value
Overview of Financial Markets
– BKM, chapters 1, 2, 3
Week Two – The Capital Asset Pricing Model
• Theory of the CAPM
• Applications of CAPM
– BKM, chapter 9
Week Three – Multi factor models
• Arbitrage Pricing Theory
• The Fama & French 3-Factor Model
– BKM, chapter 10
Week Four – Macroeconomic and Industry Analysis
• Fundamental Analysis or bottom up approach
• Top down approach:
– BKM, chapter 12
Week Five – Portfolio performance evaluation
• Various performance measures and performance attribution
• Style analysis
– BKM, chapter 18
Week Six – Fixed Income
• Bond Prices and Yields
• The Term Structure of Interest Rates
• The Term Structure of Interest Rates (cont’)
• Duration Matching and Immunization. Convexity
– BKM, chapters 5, 15, 13, 16
Week Seven –Introduction to technical analysis and alternative investments and Exam
–Readings TBA
Week Eight and Nine – Final presentation, group project
Peking University HSBC Business School
Spring II, 2013 (fourth module 20012-2013)
Location/Time: C-125/1:30-3:20 M, W Instructor: Dr. Erik Benrud
Office Hours: M 4-5, Tue. 4-5 or by appt. Office: C-414
Tel #: 86-755-2603-3084 E-mail: ebenrud@phbs.pku.edu.cn
Objective: This course offers the financial theory and quantitative tools necessary for understanding how stock, bond prices are determined, and how financial assets are used for investment decisions. Topics covered include modeling the relation between risk and return, optimal portfolio selection based on mean–variance analysis, asset pricing models, money management, and more. Although stocks get a lot of attention, the course includes coverage of fixed income securities (bonds) and derivative securities (options, futures), and alternative investments (hedge funds) and how they combine to make up a well-diversified portfolio.
Required Materials: a time-value of money (TVM) calculator and access to EXCEL and the Internet.
Required Text: Bodie, Zvi, Alex Kane, and Alan Marcus, Investments, McGraw Hill, 9th Edition, ISBN: 0073530700, 2010 (BKM).
Approach: The course will consist of lectures, video representations, homework, projects, and discussions. Lectures will include discussions of current events or subjects I have assigned as research topics. Work in Excel will be part of the learning process. Many assignments will involve downloading data from the Internet and analyzing it in Excel.
Class Format: Most of the class time will consist of lectures and discussion of current events in alternative investments.
Practice Problems: I will periodically post practice problems that you should be able to work for the exams.
Assignments to hand in: These will be assigned at various times. They will be Excel problems, cases, and advanced problems. Late assignments will be penalized by a letter grade each day. When specified, you can work in groups of 2s and 3s. You can also work on your own.
Final Project/Presentation: Students will form in groups of appropriate size. Each group will recommend a portfolio allocation (for example 50% equity, 30% debt, 20% fixed income) and suggestions of specific assets to include. The presentation and report will describe and justify the recommendation. Presentations will be given in the classes that follow the exam.
Also, during the first 6 weeks, I will arrange for several showings of the films: Inside Job and Enron: the Smartest Guys in the Room. These are required and material from the films will be on the exam.
Grading: In-class work/participation 20%
Homework/Research 20%
Exam in week #7 40%
Presentations 20%
Course Outline and Readings
This is an approximate schedule of topics that will be covered. You should read the corresponding material in the text prior to the lecture. “BKM” refers to the book by Bodie, Kane and Marcus.
Week One – Risk and Return; Asset Pricing and Present Value
Overview of Financial Markets
– BKM, chapters 1, 2, 3
Week Two – The Capital Asset Pricing Model
• Theory of the CAPM
• Applications of CAPM
– BKM, chapter 9
Week Three – Multi factor models
• Arbitrage Pricing Theory
• The Fama & French 3-Factor Model
– BKM, chapter 10
Week Four – Macroeconomic and Industry Analysis
• Fundamental Analysis or bottom up approach
• Top down approach:
– BKM, chapter 12
Week Five – Portfolio performance evaluation
• Various performance measures and performance attribution
• Style analysis
– BKM, chapter 18
Week Six – Fixed Income
• Bond Prices and Yields
• The Term Structure of Interest Rates
• The Term Structure of Interest Rates (cont’)
• Duration Matching and Immunization. Convexity
– BKM, chapters 5, 15, 13, 16
Week Seven –Introduction to technical analysis and alternative investments and Exam
–Readings TBA
Week Eight and Nine – Final presentation, group project