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| FINA0003-1 | Investments
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| Duration : | 30h Th |
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| Credits/ECTS : |
| Bachelor in economical and in management sciences, 3rd year | | Deuxième quadrimestre | | 3 |
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| Bachelor in economical and in management sciences, 3rd year | | Deuxième quadrimestre | | 5 |
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| Bachelor in business engineering, 3rd year | | Deuxième quadrimestre | | 4 |
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| Bachelor in management sciences, 3rd year | | Deuxième quadrimestre | | 3 |
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| Master in Economical Sciences, in-depth approach, 1st year | | Deuxième quadrimestre | | 5 |
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| Master in Economical Sciences, didactic approach, 1st year | | Deuxième quadrimestre | | 5 |
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| Master in Economical Sciences, Professional Focus in Economic Policies and Analysis, 1st year | | Deuxième quadrimestre | | 5 |
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| Holder(s) : | Laurent Bodson |
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| Language : | Langue anglaise |
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| Course contents : | (1) Underlying Philosophy
The common theme unifying this course is that security markets are nearly efficient, meaning most securities are usually priced appropriately given their risk and return attributes.
The course is organized around several important themes:
A. The central theme is the near-informational-efficiency of well-developed security markets (such as those in the US).
B. A second theme is the risk-return trade-off. This is a no-free-lunch notion, holding that in competitive security markets, higher expected returns come only at a price: the need to bear greater investment risk. However, this notion leaves several questions unanswered. How should we measure the risk of an asset? What should be the quantitative trade-off between risk and expected return? The approach we present to these issues is known as Modern Portfolio Theory (MPT). MPT focuses on the techniques and implications of efficient diversification; we devote considerable attention to the effect of diversification on portfolio risk as well as the implications of efficient diversification for the proper measurement of risk and the risk-return relationship.
C. The course places great emphasis on asset allocation for two reasons. First, it corresponds to the procedure that most individuals actually follow. Typically, you start with all of your money in a bank account, only then considering how much to invest in something riskier that might offer a higher expected return. The logical step at this point is to consider other risky asset classes, such as stocks, bonds, or real estate. This is an asset allocation decision. Second, in most cases, the asset allocation choice is far more important in determining overall investment performance than is the set of security selection decisions. Asset allocation is the primary determinant of the risk-return profile of the investment portfolio, and so it deserves primary attention in a study of investment policy.
D. This course does not offer a broad and deep treatment of futures, options, and other derivative security markets; because this theme is covered in another course, organized by Professor A. Muller. You have to know that these markets have become both crucial and integral to the financial universe and are the major sources of innovation in that universe. Your only choice is to become conversant in these markets.
(2) Organization and Content
A. Portfolio Theory
1. Risk and Risk Aversion
2. Capital Allocation Between the Risky Asset and the Risk-Free Asset
3. Optimal Risky Portfolios
B. Equilibrium in Capital Markets
4. The Capital Asset Pricing Model
5. Index Models
6. Multifactor Models of Risk and Return and the Arbitrage Pricing
Theory
7. Market Efficiency and Behavioral Finance
C. Security Analysis and Bond Valuation
8. Equity Valuation Models
9. Bond Prices and Yields
10. The Term Structure of Interest Rates
11. Managing Bond Portfolios
D. Applied Portfolio Management
12. Portfolio Performance Evaluation |
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| Course objective : | -- |
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| Prerequisites : | This course requires few prerequisites. However, some acquaintance with financial markets and instruments is assumed. Familiarity with the cash flows discounting and basic statistical techniques (descriptive statistics, hypothesis testing and linear regression) are also assumed. In chapters 1 through 4 and appendix A of the textbook we are using, all these topics are refreshed. Some knowledge on corporate finance may help, but is not assumed. |
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| Workshops : | -- |
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| Organization : | mer. 03/02/2010 15:00 17:30 r.Sm3 (B31)
mer. 10/02/2010 15:00 17:30 r.Sm3 (B31)
mer. 17/02/2010 15:00 17:30 r.Sm3 (B31)
mer. 24/02/2010 15:00 17:30 r.Sm3 (B31)
mer. 03/03/2010 15:00 17:30 r.Sm3 (B31)
mer. 10/03/2010 15:00 17:30 r.Sm3 (B31)
mer. 17/03/2010 15:00 17:30 r.Sm3 (B31)
mer. 24/03/2010 15:00 17:30 r.Sm3 (B31)
mer. 31/03/2010 15:00 17:30 r.Sm3 (B31)
mer. 21/04/2010 15:00 17:30 r.Sm3 (B31)
mer. 28/04/2010 15:00 17:30 r.Sm3 (B31) --> Introduction to Mutual Funds
mer. 05/05/2010 15:00 17:30 r.Sm3 (B31) --> Changed to 14:00-17:00 (KBL intervention "Investing rules among Mutual Funds (i.e. OPC)")
mer. 12/05/2010 15:00 17:30 r.Sm3 (B31) --> Cancelled |
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| Written notes : | BODIE, Z., A. KANE, and A.J. MARCUS, Investments, 8th edition, McGraw Hill, New York, 2008 |
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| Assessment : | Written exam (3-hour exam, closed books) |
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| Contacts : | Professor:
Laurent.Bodson@ulg.ac.be
Research Assistant: Laurent.Cavenaile@ulg.ac.be
N1 Tel.: 04/232.74.32. |
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| Remarks : | -- |
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