finn 454-portfolio management-salman khan

7/30/2019 FINN 454-Portfolio Management-Salman Khan

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Lahore University of Management Sciences

FINN 454 Portfolio ManagementSpring 2013

Instructor Dr. Salman Khan

Room No. 4-08

Office Hours

Email [email protected]

Telephone 35608220

Secretary/TA Mr. Tahir Abbas

TA Office Hours

Course URL (if any)

Course Basics

Credit Hours 4Lecture(s) Nbr of Lec(s) Per Week 2 Duration 1Hour50Min

Recitation/Lab (per week) Nbr of Lec(s) Per Week Duration

Tutorial (per week) Nbr of Lec(s) Per Week Duration

Course Distribution

Core

Elective Yes

Open for Student Category

Close for Student Category

COURSE DESCRIPTION

The course is designed to study theory and empirical evidence relevant for portfolio management. An emphasis is placed on understanding,

how an investment professional would allocate funds in an hypothetical portfolio. The course is rich in theory and modeling techniques.Major topics include estimation of capital market parameters, trade-off between risk and return, optimal portfolio selection, equilibrium asset

pricing models, and portfolio management. Emphasis will be put on development of techniques that should be part of the tool kit of those

interested in becoming professional investors and/or researchers in finance.

COURSE PREREQUISITE(S)

Principles of FinanceIntermediate Finance

COURSE OBJECTIVES

The objective of the course is to study theory and empirical evidence relevant for portfolio management. An emphasis isplaced on understanding, How an investment professional would allocate funds in an hypothetical portfolio. Major topicsinclude estimation of capital market parameters, trade-off between risk and return, optimal portfolio selection, equilibrium

asset pricing models, and portfolio management. Emphasis will be put on development of techniques that should be part of

the tool kit of those interested in becoming professional investors and/or researchers in finance. The course is rigorous in

nature and challenging and will require hard work.

Learning Outcomes


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Upon successful completion of the course, the student will have a solid foundation in modern portfolio theory and goodunderstanding of portfolio management in practice.Grading Breakup and Policy

Quiz and Assignment(s): 15%Attendance: 10%

Midterm Examination:

Group Project: 25%

Simulation: 20%

Final Examination: 30%

Examination Detail

Midterm

Exam

Yes/No: No

Combine Separate:

Duration:

Preferred Date:

Exam Specifications:

Final Exam

Yes/No: Yes

Combine Separate: Combine

Duration: 2 Hours

Exam Specifications: MCQs and/or Long questions

COURSEOVERVIEW

Week/

Session/

Module

TopicsRecommended

Readings

Objectives/

Application

Week 1 Introduction to the course-The Investment Settings and the Asset

Allocation Decision

Chap I & 2 The course outline and evaluation tools will bebriefly discussed. We are going to start the

course with some of the basic concepts on

investments such as return calculations, marketsetc.

-What is asset allocation, portfolio management

process, investment planning, policy statements,

the objectives and constraints in a policystatement?

-How and why do investment goals change over

a persons lifetime and circumstances?

-Why do asset allocation strategies differ across

national boundaries?


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Week 2 Organization and Functioning of Securities

Markets

Chap 4 & 5 What is the purpose and function of a market?This includes understanding, the characteristics

that determine the quality of a market, the

differences between capital markets, the nature

and linkages of-the national, regional exchanges

and OTC markets, the alternative market-

making arrangements.

The understanding goes a little deeper when wewill discuss the major types of orders available

to investors and market maker, the major

functions of the specialist.

-What are the significant changes in markets

around the world during the past 15 years?-What are the major changes in world capital

markets expected over the next decade?

The uses of some of the major security market

indicator series (indexes), there characteristics,

historical versus current data.

Week 3 Efficient Capital Markets Theory Chap 6 In this week(s) we discuss the questions such as

-What does it mean to say that capital marketsare efficient?

-Whyshouldcapital markets be efficient?

-What factors contribute to an efficient market?

-What is behavioral finance and how does it

relate to the EMH?

-What are some of the major findings of

behavioral finance and what are the implications

of these findings for the EMH?

-What is the evidence related to the EMH formarkets in foreign countries?

Week 4 An Introduction to Portfolio Management Chap 7 In this week(s) start discussion from risk

aversion, and what evidence indicates that

investors are generally risk averse all the way

leading to Markowitz portfolio theory.

-What is the risk-returnefficient frontier of

risky assets?

-Is it reasonable for alternative investors toselect different portfolios from the portfolios on

the efficient frontier?

-What determines which portfolio on the

efficient frontier is selected by an individual

investor?Week 5 &6 An introduction to asset pricing models Chap 8 Overall these week(s)s discusses all the basic

and advanced concepts related to CAPM,Capital market line, Security Market Line,

assets Characteristic Line and empirical results

from tests that examine the stability of beta.


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Week 7 Multifactor models of risk and return Chap 9 In these week(s) the focus will be onunderstanding the deficiencies of the capital

asset pricing model (CAPM) as an explanation

of the relationship between risk and expected

asset returns and the arbitrage pricing theory

(APT) and what are its similarities and

differences relative to the CAPM. We will alsostudy the multifactor models and how are they

related to the APT.

Week 8 Macroeconomic and Market Analysis: The

Global Asset Allocation Decision

Chap 12 In this week(s) we will discover the expected

and the empirical relationships betweeneconomic activity and security markets. We will

also study the questions such as:

-What is the macroeconomic approach to

estimating future market returns?

-What are the major macroeconomic techniques

used to project the securities market?

-How do the basic valuation variables differamong countries?

-What factors should be considered when

analyzing the outlook for a foreign economy and

its stock and bond market?

-What is the asset allocation procedure for a

global portfolio?Week 9 Industry Analysis Chap 14 In this week(s) our focus will be on industry

analysis specifically understanding

-the difference between the returns for

alternative industries during specific timeperiods.

-the consistency in the returns for individual

industries over time.-the performance for firms within an industry

consistent? What is the implication of theseresults for industry and company analysis?

-Is there a difference in risk among industries?-What happens to risk for individual industries

over time? What does this imply for industry

analysis?

-What are the stages in the industrial life cycle

and how does the stage in an industrys life

cycle affect the sales estimate for an industry?

-What are the five basic competitive forces thatdetermine the intensity of competition in an

industry and, thus, its rate of return on capital?

And a lot more Week 10 Company Analysis and Stock Valuation Chap 15 In this week(s) we will discuss the company

analysis in comparison to the stock valuation

that you have already studied at intermediatefinance and principles of finance level.


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Week 11 Technical Analysis Chap 16 In this week(s) we will briefly touch thedifference between the technical analysis and the

fundamental analysis, the underlying

assumptions of technical analysis, the major

advantages of technical analysis compared to

fundamental analysis, major challenges and

rules and some tools of technical analysis.Week 12 Equity Portfolio Management Strategies Chap 17 Here we will develop the understanding of two

generic equity portfolio management styles, hreetechniques for constructing a passive index

portfolio, learn the difference between the goal

of a passive equity portfolio manager and an

active manager, and various portfolio

management techniques.Week 13 The Analysis and Valuation of Bonds Chap 19 The focus will be on bond valuation techniques,

duration, convexity and yield curve analysis

Week 13 Bond Portfolio Management Strategies Chap 20 In this week(s) we focus on major bond portfolio

strategies.Week 14 Professional Asset Management

Chap 25

Here we will discuss most important aspects of

professional asset management such as structure,

compensation, performance and ethics.Week 14 Evaluation of Portfolio Performance

Chap 26

In this week(s) we will discuss number of

portfolio performance measures, differences

among those measures from investor as well asmanager point of view.

Portfolio Risk Management TBD We will briefly look at different contemporary

portfolio risk management strategies.

Textbook(s)/Supplementary Readings

Investment Analysis and Portfolio Management, 7e, Frank K. Reilly, Bernard J. Hank, South-Western College.

finn 454-portfolio management-salman khan

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