School of Business
Fi 4240 Global Portfolio Management
Instructor: Elchin Huseynov
Class meets: Friday 6:30-9:30
Tel: 050 4466013
Office hours: after class or by appointmen
Faculty Coordinator: Tofig Ahmadov, PhD
Corporate Finance and Statistics
- Bodie, Kane and Marcus. Investments, 6th edition
- Lecture notes and case studies
- Frank K. Reilly & Keith C. Brown, Investment Analysis and Portfolio Management, 8th ed.
- Corporate Finance and Portfolio Management. CFA Program Curricilium, Volume 6, 2010
- The papers and journal articles provided during the class
3. COURSE OBJECTIVES AND DESCRIPTION
The course will focus on the application of financial theory to the issues and problems of investment management. Topics will include portfolio optimization and asset allocation, the basics of bond pricing and debt portfolio management, the theory of asset pricing models and their implications for investment as well as techniques for evaluating investment management performance. The course will build upon the analytical skills developed in Corporate Finance. Working knowledge of statistics and spreadsheet skills are essential. After this course, you should have a good understanding of financial markets, asset allocation, portfolios, interest rates, risk and return, and market efficiency.
4. INTENDED LEARNING OUTCOMES
Learning outcomes for each lecture are presented on the first page of lecture notes so that students can track their progress in mastering the concepts in each readingCore Learning Area / Learning Outcome
Interpersonal Communication Skills. / Students will be able to express and supplement their own analysis and conclusions in financial terms and common business language.
Technology Skills / Students will be given ample opportunity to use their Excel skills and perform Internet research.
Quantitative Reasoning / Students will perform numeric and verbal analysis of financial statements
Critical Thinking / Exercise powers of inquiry, logical thinking, and critical analysis of arguments and evidence. Interpret and evaluate theoretical arguments and empirical evidence
Ethics and Responsibility / Evaluate and discuss the challenges of issues relating to social responsibility, corporate governance and ethical and professional behavior arising from the recent financial scandals.
Management Knowledge and Skills / Provide a comprehensive understanding of the principles and techniques of financial statement analysis. Students are exposed to a number of economic and accounting concepts that practitioners in the field use and apply.
5. HOW THE CLASS SESSIONS WILL BE CONDUCTED
This course is combines traditional lecturing and problem solving with discussion of in-depth academic cases and short, real life cases from the current business press. Students are expected and encouraged to participate in the discussions and this participation will be reflected in their grade (see section 7 of syllabus). I expect you to keep up with practice problems (from both the text and those written by me) on a regular/daily basis. To this end, there will be a short (approx. 15 minute) quiz at the beginning of nearly every class meeting
6. POLICY ON THE AVAILABILITY OF READINGS
Lecture notes and slides will be handed in after the class.
7. CLASS PARTICIPATION
Due to the pragmatic approach of the course it is particularly important that students prepare for the class and participate in the discussions. Good financial analysis incorporates making sensible judgments which is not possible to learn from any textbook. Readings and cases should be read at least two times with an eye to the key points.
Class participation means contributing to the learning of your fellow students and maintaining a respectful learning environment. Asking and answering questions in class, and participating in class discussions and volunteering to solve problems in class are excellent methods of class participation.
Almost all participation noted by the instructor will increase the student’s grade, but negative class participation includes disrupting class (e.g. by coming in late), not paying attention during a student presentation, other forms of rudeness toward your fellow students, and a lack of cooperation with methods to ensure that no cheating occurs during minute papers and exams. Grading class participation is necessarily subjective and no subdivision of the grade will be available to students.
Students should come to class ready to challenge others’ views (including the professor’s) but do so in the manner of a mature professional seeking solutions and evaluating alternatives.
To emphasize the importance of class participation frequency and quality of students’ contribution will make up 10% of the grade. Sessions should not be missed unless an emergency situation takes place, in which case students should notify the instructor via email before class.
8. MINUTE PAPERS
There are six (6) minute papers in this course and these will be given out on a random basis. These minute papers are all close-book papers and questions are designed to be completed in a few minutes and may comprise of either a few short answer questions, a short essay or a problem. They will be reviewed afterwards in class. They may be given at the start of class, after the break, or at the end of class. The grades for the BEST 2 minute papers will be added to the final grade. Points achieved on minute papers will make up 15 grade points. There is no makeup or resists for minute papers.
9. PORTFOLIO CONSTRUCTION PROJECT
The Portfolio construction project is about constructing an optimal portfolio for given optimization problem. This experiment will provide you with a real world trading experience, portfolio management, and asset allocation strategies. Your grade on this trading game will be based on the investment policy statement, economic analysis, the portfolio construction report and the Performance of the portfolio. The project will be due the last day of classes.
Two exams (midterm and final) will be given during the course of the semester. Exams may be a mixture of multiple choice and problem/essay questions. The last exam is comprehensive. Exams will be based on instructor lecture material, text readings, assigned outside readings, and assigned homework problems and questions. In addition to the exams, students will also be assigned a project. Finally, students will write summaries of assigned investment-related papers. The grade-weight for each of the gradable components is as follows:
2 minute papers @ 10 points each 20 points
Project 20 points
Paper summary 10 points
Mid-term Exam 20 points
Final Exam 30 points
Maximum total 100 points
Letter Grade PolicyLetter grade / Total points
A / 97-100
A- / 90-92.9
B+ / 87-89.9
B / 83-86.9
B- / 80-82.9
C+ / 77-79.9
C / 73-76.9
C- / 70-72.9
D / 60-69.9
F / Below 60
Homework will be divided between respective student groups where you will be expected to discuss and address the questions prior to each class session. Students present their discussions/findings/calculations during the seminar sessions. Each group member should stand ready to present where they will be randomly called upon to do so.
11. Academic Integrity
Students enrolled in College of Business classes are expected to maintain high standards of ethical conduct within the classroom and when completing assignments, projects, and/or exams. Plagiarism and other forms of academic dishonesty such as cheating will not be tolerated. Students are expected to provide appropriate citations for non-original writing even if the original work is paraphrased. Penalties for plagiarism and other forms of academic dishonesty may be severe.
12. COURSE OUTLINESession 1 – Lectures 1&2
/ Introduction. Fundamental Concepts in Financial Analysis
Ø Financial Markets and Market Structure
Ø Financial Securities
Ø Major Financial Statements and Information Sources
Ø Statistics Review
Session 2 – Lectures 3&4
/ Bond and Equity Analysis
Ø Bond Prices and Interest Rates
Ø Yield to Maturity vs. Current Yields
Ø Bond Variations and Risk
Ø Differentiation Between Growth Company and Growth Stock
Ø The Stock Markets
Session 3 – Lectures 5&6
/ The Capital Asset Pricing Model
Ø Estimating the CAPM Inputs
Ø An Investor’s Risk vs. Reward Tradeoffs
Ø The Mean-Variance Efficient Frontier and the CAPM Formula
Session 4 – Lectures 7&8
/ Investor Choice: Risk and Reward
Ø Measuring Risk and Reward
Ø Risk free rates and risk premiums
Ø Portfolios, Diversification, and Investor Preferences
Session 5 – Lectures 9&10
/ Financial Derivatives
Ø Types of DerivativesØ Derivative Markets: Past and Present
Ø How Big is the Derivative Markets
Ø Criticism of Derivative Markets
Session 6 – Lecture 11&12 / Managing Portfolios and Performance Evaluation
Ø Bond Duration and Maturity
Ø Bond Index Funds
Ø Performance Evaluation and Risk Management
Ø Portfolio Evaluation and Active Portfolio Management
Session 7 – Lecture 13&14
/ Active Portfolio Management
Ø Portfolio Performance Evolution
Ø International Diversification
Ø The Process of Portfolio Management
Last Session / Review before the final exam.
Week 15 Final exam