Ritter FIN 367 – Spring 2014 page XXX
Finance 367Investment management
(Unique # 03505)
Spring 2014
Professor John T. Ritter
Class GSB 5.142B
Class Hours Tuesday and Thursday 3:30-5:00
Office 6.210 GSB - Walkway
Office Hours Tuesday and Thursday 5:00 – 6:30 or by appointment
Phone 512-799-7749 (c)
Course Web Page via Canvas
Teaching Assistant I prefer that you see me with questions
Course Objectives
This course is designed to be a survey of the field of investments. The course will focus on the application of financial theory to the issues and problems of investment management. In particular, you should leave this class understanding the components used to put together a portfolio. This requires you to understand many different types of investable assets (bonds, stocks, mutual funds, and derivatives), how they are combined to form a portfolio, and how they are each affected by the overall economy. In addition, there is background and fundamental information which is necessary to understand. This information includes topics such as types of markets, how to place orders, behavioral finance and what stock indices represent.
Prerequisites
Finance 367 is a Restricted Course for students who are currently enrolled in a major program in the College of Business and Administration. Note that several prerequisites apply for this course and are published in the Course Schedule. Prior completion of Finance 357 or Finance 357 H, Statistics 371G or Statistics 371 H are among these requirements. In addition, proficiency in mathematics and spreadsheet packages is assumed. Students who are uncertain as to whether they satisfy these requirements should notify the instructor.
Materials
Textbook: Investment Analysis and Portfolio Management, 10h Edition by F. Reilly and K. Brown (Cengage Learning, 2011) – available at the Co-Op
Supplementary Readings & Lecture Slides: All supplementary readings listed in the syllabus and lecture slides will be available on-line on Canvas. Lecture Slides will be available following the class. Lecture Slides are meant as an outline to reduce the amount of rote copying of definitions and formulas but certainly not as a self-contained lecture summary. Reading the lecture slides without attending class will most likely be of little benefit.
Additional Readings: Additional readings regarding current events may be made available as Handouts or posted on-line via Canvas.
Book for Project: “The Essays of Warren Buffett: Lessons for Corporate America” by Warren Buffett and edited by Lawrence Cunningham (3rd Edition). You must buy this on your own – it is sold by Amazon (and others).
Calculator: You will need a business calculator for this class. The calculator should have the following keys: IRR, n, i, PV, PMT, FV, and CF. As long as those keys are present, the calculator is fine. If you may consider taking the CFA exam in the future, I recommend the HP 12c (this calculator is the finance industry standard and one of only two calculators that may be used on the CFA exam). The other calculator which is permissible for the CFA exam is the Texas Instruments BA II Plus. You should bring a financial calculator to every one of our class meetings.
Strongly Recommended: Bloomberg.com, WSJ, Financial Times, The Economist, or some other Financial News source
Professionalism Policy
The highest professional standards are expected of all members of the McCombs community. The collective class reputation and the value of the program’s experience hinges on this. Faculty are expected to be professional and prepared to deliver value for each and every class session. Students are expected to be professional in all respects. This Includes:
-Being on-time and in your seat when class starts
-Staying until the end of class
-Being constructive to the learning environment
-Being “present” in the class and focused on class material. This includes, but is not limited to no internet, no email, no cell phones, no laptops, no texting, and no talking to your neighbor about last night.
-Coming prepared to contribute to the class
-Communication with the professor
Think about this class as though it were a job, and this is a bi-weekly meeting with a senior executive at your firm. Would you show up late, unprepared, be texting during the meeting? Of course not! Professionalism in class is a good discipline to prepare you for the real world. As the semester progresses, you will realize that I will hold you to a very high standard, but I will hold myself (and how this class is presented) to an even higher one.
Grading
Your grade in the course will be determined as follows:
Mid-Term Exam 1 (Weeks 1 through 11) 20%
Mid-Term Exam 2 (Weeks 13 through 20) 25%
Final Exam (Comprehensive): 30%
Book Review of “The Essays of Warren Buffet” 20%
Class Participation 5%
Letter grades for the course will be based on the student’s ranking in the course relative to other students (i.e., the curve) as shown to the left. In general, there will be about 30% A’s, 40-50% B’s, 20-30% C’s or below. Plus/minus grades will be assigned for the final grade (there is no A+ though). With that said, grades are typically curved up substantially at the end of the semester. Curves are done for the class as a whole, not for individuals. In other words, someone with a final course grade of 88 will not get a higher grade than someone with a course grade of 89 as long as that person is eligible for the curve. Also, there will be a uniform grading average target for all 367 classes which will be somewhere between 3.2 & 3.4.
Appeals: There are no verbal appeals of grade changes. You should submit a written statement explaining the problem within one week of receiving your grade and we will be happy to re-grade any exam or assignment. The entire exam or project will be re-graded and the score may increase, remain the same, or even decrease.
Late Assignments: Assignment turned in after the start of Class will lose 25% of the grade. After 1 day, an assignment will not be accepted. There is only one assignment, so make sure it is in on-time.
Bad Questions: Unfortunately, there are poorly written questions that find their way into exams from time to time. If more than 3/4 of the class misses a question, it will automatically be deemed a ‘bad question’ and removed from consideration.
Fairness to Students: I strive to treat students with dignity and fairness. This does not mean that I will agree with your ideas or opinions. If you feel that I have been unfair in any way, please let me know. It takes courage to do so.
Make-Up Work: There are no do-overs in the business world. Likewise, there are no make-ups or extra-credit given in this class.
Class Preparation
It is particularly important to me that you prepare for class, arrive on time, stay for the entire class, keep your laptops and other non-necessary electronics closed and most of all respect your peers. Being prepared for class means that you have read the assigned materials and that you have worked any assigned problems. That way, you will have thought about the material already. I will not collect homework. However, failure to do the problems can result in a lower grade (See Attendance Policy and Class Participation Below). Homework should be done because you want to learn the material and contribute to the class, rather than because you want to receive a check mark. I am a firm believer that you learn finance by working problems. The assigned problems are there to ensure that you consistently progress in the course and pace yourself. The material builds upon itself. If you fall behind, it will be difficult to catch up at exam time.
Class Participation
Class participation and questions are encouraged! If you have a question, you can be assured that someone else in the class has the same question, so ask. However, participation will not always be voluntary. This is why it is important to come to class prepared. Participation will be 5% of your grade. Class contribution consists of positive and constructive comments, questions, remarks, and answers in class. Effective contribution means participating such that your answer or question moves our analysis and understanding forward. In addition, as with your future employer, your participation includes participating in the class in an ethical and upstanding manner. Any violations of the honor code or inappropriate attitude in class will be met with zero tolerance, removal from the classroom, and potential prosecution under University guidelines.
Attendance Policy and Late Policy
I expect you to attend class and I expect you to be on time. I understand that things happen – you oversleep, a bus runs late, you’re sick, etc. I excuse three absences or late appearances. You get 3 absences / tardies. After that, you are ineligible to have your grade curved. When students don’t come to class tend to receive grades of D or F on the exams. When students arrive late, they are generally confused and tend to disrupt other students and the teaching of the class.
Here’s the positive side of my policy: as long as your absences and late arrivals do not add up to more than three (note: that is a total of three, not three of each) and you do not disrupt our class in any other way (packing up early, leaving early, talking to your neighbors, etc.), you will be eligible to have your grade curved. If you are not eligible to have your grade curved, you will be graded solely on the above grading scale. As stated above, the curve in this class is normally significant and something that you want to be eligible to participate in.
If you need to leave the class early for any reason, please let me know before the beginning of the class period and leave quietly so as not to disturb the other members of class.
Students should attend the class section to which they are registered. I only teach 1 section. My class will cover different topics than or topics in a different order than other professors.
Excused Absences: I honor excused absences as determined by the College of Business Administration. The College makes the determination and you provide the approved excuse to me. Please, do not bring an excused absence to me until you have been approved by the College. If you plan to observe a religious holiday, please let me know at least 2 weeks in advance according to University guidelines, so that I may make appropriate accommodations for you, if required.
Preparing for the Exams
I will teach you the material in class and then you will need to spend time working AFTER class. You will need to review what we did in class and work problems. Working problems is essential. You should read the textbook when you are having difficulty understanding my notes and problems. If you still have questions, please come see me during my office hours as soon as possible.
Since you won’t have time to do the homework problems again and again, let me suggest a good way to study. After you work the problems, every few days you should go back and re-read the questions. By doing this, you will trigger the thought process that you had to go through in order to answer the question. And always remember, it’s not a matter of whether you are able to answer the question the first time you see it…the issue is whether you can recognize the question / problem and answer the question in the future (and whether you can apply these concepts to the real world).
This class utilizes a lot of non-textbook readings. These readings are used to enhance and expand on the text book readings and provide additional real world application for the discussions. You will not be tested on anything in the non-textbook readings that is not specifically discussed in class. This means you do not need to memorize all of the facts and ideas in these readings. However, you do need to read them in order to be able discuss them in class.
Exams
The Mid-Term exams will be held in class and will cover material covered up to that point in class. The Final Exam will be comprehensive and will cover material from lectures, class discussions, assigned readings, and guest lectures. Exams will strive to test the comprehension level, not merely memorization skills. Exams tend to include most of the material that I have taught (rather than just a few big questions). The tests will include both qualitative and quantitative material. The qualitative questions are usually short answer or multiple-choice. The difficulty level of the multiple-choice questions is intended to parallel the level of question that you could face on the CFA® exam.
I do not release old exams. I have found that releasing old exams is problematic because (1) it results in people studying “to the exam” rather than studying to learn; and (2) students inevitably feel that old exams are easier than the current exam. In addition, I do not allow students to keep their exams. This maintains the fairness of exams, since you know that no one has seen old exams. You will have ample opportunity to review your exam during the week following the reception of the grade.
Book Review Project
This project is intended to further your Investments education and to help you to realize that you can continue to educate yourself when you graduate. For your project, I want you to write a paper about “The Essays of Warren Buffett: Lessons for Corporate America” by Warren Buffett and edited by Lawrence Cunningham (3rd Edition). Your paper should be a well-written, coherent summary that addresses the following topic: “Key Takeaways from ‘The Essays of Warren Buffett’”.