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Administrative Information
Administrative Information
Mr. and Mrs. E.P. "Pat" Nalley/BORSF Endowed Professorship in Business Administration; Rayne State Bank U J. "Ducky" Prevost/BORSF Professorship-MBA Faculty.
Mr. and Mrs. E.P. "Pat" Nalley/BORSF Endowed Professorship in Business Administration; Rayne State Bank U J. "Ducky" Prevost/BORSF Professorship-MBA Faculty.
Office: 325 Moody Hall. Office Phone: 337-482-6099
Office: 325 Moody Hall. Office Phone: 337-482-6099
UL Lafayette COVID-19 Syllabus Policies and Guidelines
Course Title: FNAN 505 - Security Analysis & Portfolio Mgmt..
Semester: Fall 2021
Credit Hours: Three Semester Credit Hours.
Classroom: MX 120; Days: M: 06:00 - 08:50 pm.
Course prerequisites-GENERAL: Introduction to Accounting, Introduction to Economics, Introduction to Finance, Introduction to Statistics& Microcomputer proficiency.
E-mail: s.rao@louisiana.edu.
This is very important. To manage the flow of incoming messages I use filters, that can automatically label, archive, or delete mail, even keep it out of Spam. While sending an e-mail, remember to use in the subject header "FNAN505". Reading of a text and questions from the text. could be assigned via e-mail. I will often send messages containing problem set hints, general announcements, and sometimes answers to questions that one of you asked and are of general interest. If you email me a question that seems particularly interesting or illuminating, I may send it (with my answer) to the entire class. If you do not want me to forward your questions in this manner, please let me know when you ask them.
Course Materials: Textbook: INVESTMENTS, 12th Edition Loose-leaf print with Connect, 2021. Author: Bodie, Kane and Marcus, Publisher: Irwin McGraw-Hill.
ISBN: 978-1266587337;
Suggested Readings: Wall Street Journal, N.Y.Times, Fortune, Forbes, Business Week, Barron's, Journal of Finance, J. of Portf. Management, J. of Fin. Economics, J. of Fin. & Quant. Analysis, Financial Analysts Jrnl, J. of Fin. Research, J. of Business, Harvard Business Review, Fin. Management, Journal of International Business Studies.
Some Course Documents may be kept at Moodle
Check Moodle twice a week for Announcements, Course documents, assignments, external links, etc.
Course Objectives & Prerequisites
Course Prerequisites-SPECIFIC
Course Prerequisites-SPECIFIC
SPECIFIC Course prerequisites:
Basic accounting and financial statement analysis
Basic knowledge of fixed-income and equity securities and related mathematics
Basic corporate finance (discount cash flow analysis)
Basic common sense
Course Expectations
Students should know enough about Excel to set up a simple spreadsheet; the course covers advanced Excel techniques, involving random number generation and simulation, Linear Programming and Solver, matrix manipulation, data tables, etc. The student must have read the assigned material and completed the assigned work before each class. Each student must be able to discuss the chapter material. The lecture shall concentrate on the analytical material and place less emphasis on descriptive material. FNAN 505 is a specialized course in portfolio management that relies heavily upon quantitative analysis and therefore demands substantial effort from the student. Class attendance is necessary but not sufficient for learning portfolio management. Students will not be able to pass the exams if they are to cram on the night of the exam, only. Students should read the chapter before the chapter is discussed in the class. Thus they are expected to contribute to the lecture by asking and responding to good questions and making meaningful comments.
Students are required to do: (1) Homework problems for each chapter (160 points) by visiting Connect (connect.mcgraw-hill.com), (2) Wall Street Journal Discussion questions, if and when assigned (3) Readings (primarily Finance Journal Articles) when assigned, (4) Construction of Optimal Risky Stock Portfolio on the efficient frontier using Markowitz as well as Single Index models (20 points), and (5) Mutual Fund Project (20 points).
In order to do well in this class, it is strongly recommended that students do the homework assigned. The problems in homework are designed to provide numerical drills to complement the conceptual class discussions and may not be representative of exam questions. For a schedule, See Connect Assignments. You may be asked to submit handwritten answers (no word processors or photocopies) to some of these problems when they are due. Late submissions will not be accepted. I will provide a list of problems for each chapter that highlights the important concepts. It is strongly recommended that they be done to solidify your understanding of the material. Occasionally, we may either work through problems in class together or I may assign problems to be done individually and then discussed during class. Building spreadsheet models helps to achieve one of the main goals of this course to learn the logical relationships among financial variables. Moreover, the ability to work comfortably with spreadsheet models is an essential skill in pursuing a career in finance, and it is a skill that can only be acquired through practice.
RECOMMENDED: A subscription to the Wall Street Journal. A special student rate is available by signing up online. When you subscribe to the WSJ, you also get a subscription to the Online versions of the WSJ, and Barron's at no additional cost.
The Readings assigned for each class are book chapters and journal articles. Preparation for class discussion is extremely important since class participation will count towards your grade. Moreover, it will be hard to follow class discussions if you have not read the assigned material. Assigned material will come mostly from practitioner-oriented journals (Journal of Portfolio Management, Financial Analyst Journal). It would be wise to subscribe to these journals if you plan a career in investment management (and even if not, just to keep up to date on what to do with your investments). Occasionally I will assign readings from academic journals (Journal of Finance, Review of Financial Studies): expect these readings to be a bit harder to go through.
Mutual_Fund_Project: _more_details_after the first test.
Mutual_Fund_Project: _more_details_after the first test.
Learning portfolio management demands extensive individual effort outside of class. Two examinations will be administered. Both exams will contain both conceptual questions (note: questions are also chosen from supplementary readings) and numerical problems, and some portion of each exam will be in a "multiple choice" format. The nature of course material is such that if you do not get a firm grasp of the first block of material, then you are highly unlikely to understand the subsequent blocks. Please make a note of dates of both exams, since you are expected to take them when they are scheduled. Makeup exams will be given in rare circumstances, only in the event that you (1) inform me that you have a problem prior to the exam, and (2) provide me with a written justification (e.g., a note from the doctor) for not taking the exam at the scheduled time. Missing an exam without meeting the above requirements will result in a grade zero for that exam. (The dept. will retain all exams.) In order to assure uniform information regarding tests: (a) I will not discuss a test outside of the classroom, and (b) I will not answer questions about the material on a test after the last class before a test. On the last class day before the exams, I reserve time for review. You are strongly encouraged to have your questions ready for that review time. For the exams, you may bring one 3" x 5" index card for formulae and notes.
Attendance Policy
Attendance Policy
Class attendance and participation is very important and will be observed carefully. Excused absences for illnesses and or emergencies will be honored. The student is responsible for obtaining notes/assignments immediately after an unexpected absence. An excused absence does not relieve a student of the responsibility for the classwork missed. An excessive absence, even up to the number allowed (two absences) without penalty, may cause you to miss essential elements of the course.
The instructor is not obligated to allow makeup test or to repeat instructions for a student whose absence has not been officially excused. Since the course sequence is important, class attendance and participation become very crucial to your success in the course. Students with special needs or those having difficulty with the course, are strongly encouraged to make an appointment for individual meeting with the class instructor.
Grading Procedures
Grading Procedures
There will be two two-and-half-hour exams. They will have both a multiple-choice component and a problem solving component, covering readings, class lectures, and homework. For problem-solving questions, grades will be based on both the approach taken and the correctness of the response. To obtain full credit, show your work in a way that enables me to follow your reasoning. All exams are strictly individual work. If you miss an exam for a good reason, the grade may be redistributed over the remaining part of the course. No Late submissions on homework/projects. The course grade will be determined as follows: Homework (using Connect-Mcgraw-Hill website) 30%, Mid-term exam 35%, Final Examination 35%. I will be the grader, and I do make mistakes. If I screw up, bring it to my attention and I will fix it.
The general grading system of A: equal to or greater than 90 percent, B:equal to or greater than 80 percent, C: equal to or greater than 70 percent, etc. will be followed.
Tentative Exam. Schedule is Midterm: October 11 (Chapters 1-9) and final: December 6 (Chapters 11-13, 16-18, and 24). Also, See Connect Assignments schedule.
Methods of Instruction
Methods of Instruction
Instructional methods will consist of lecture, presentation and discussion. Text material will be substantially supplemented by additional reading material.
Lecture notes/assignments/handouts may sometimes be made available at Moodle web site.
Read your email often. This is very important. So, I'm repeating it again - I will often send messages containing problem set hints, general announcements, and sometimes answers to questions that one of you asked and are of general interest. If you email me a question that seems particularly interesting or illuminating, I may send it (with my answer) to the entire class. If you do not want me to forward your questions in this manner, please let me know when you ask them.
Material to be covered (Tentative)
Material to be covered (Tentative)
Instructor reserves the right to make changes in course content or instructional technique without notice or obligation. Chapters 1-9, 11-13, 16-18, and chapter 24 will be covered.
Chapter One. The Investment Environment
Chapter Two. Asset Classes and Financial Instruments
Chapter Three. How Securities Are Traded
Chapter Four. Mutual Funds and Other Investment Companies
Chapter Five. Risk, Return, and the Historical Record
Chapter Six. Capital Allocation to Risky Assets
Chapter Seven. Optimal Risky Portfolios
Chapter Eight. Index Models
Chapter Nine. The Capital Asset Pricing Model
Chapter Eleven. The Efficient Market Hypothesis
Chapter Twelve. Behavioral Finance and Technical Analysis
Chapter Thirteen. Empirical Evidence on Security Returns
Chapter Sixteen. Managing Bond Portfolios
Chapter Seventeen. Macroeconomic and Industry Analysis
Chapter Eighteen. Equity Valuation Models
Chapter Twenty-Four. Portfolio Performance Evaluation
Student Learning Outcomes:
A Student should be able to choose between the various financial instruments available to the potential investor. The student should have an insight as to the interpretation, composition, and calculation process involved in the various market indexes. The student should be able to describe how securities are traded on both the primary and secondary markets. The student should calculate risk in both margin trading and short selling. Students should be able to describe the expenses associated with an investment in mutual funds and identify the major types of investment policies of mutual funds. The student should be able to describe the major factors that influence the level of interest rates, be able to apply the Fisher effect to interest rates and inflation. Students should be able to calculate risk and return statistical measures, such as holding period returns, average returns, expected returns, and standard deviations, ex- post and ex-ante. the students should be able to formulate expected returns and expected future values for uncertain investments. They should describe the concept of risk aversion and utility.
The students should be able to describe the basic statistical measurements and properties that are used to develop portfolio theory.
The students should be able to construct portfolios of different risk levels, given information about risk-free rates and returns on risky assets. The student should be able to calculate the expected return and standard deviation of these portfolios.
The students should be able to calculate the return and standard deviation for two security portfolios and be able to find the minimum variance combinations of two securities. Upon completion of this chapter the student should be able to describe systematic and firm specific risk, and of how one can reduce the amount of firm-specific risk in the portfolio by combining securities with differing patterns of returns. The student should be able to quantify this risk reduction concept by being able to calculate and interpret covariance and correlation coefficients. Building upon these concepts and upon the material in Chapter 7 (adding a risk-free asset to the portfolio and the reward-to-variability ratio), the student should be able to construct the optimal portfolio consisting of both risky and risk-free assets.
The student should understand that firm-specific risk virtually may be eliminated by investing in a variety of securities, and that portfolio systematic risk is a weighted average of the betas of the securities in the portfolios, where weights are the asset allocation percentages. Furthermore, if the portfolio is adequately diversified and firm-specific (or non-systematic) risk is virtually eliminated, then beta (or systematic risk) becomes the relevant risk measure for the portfolio. The student should describe the development and the theory of the capital asset pricing model (CAPM), and be able to design the security market line.
The student should judge the concept of market efficiency and how to make rational investment decisions based upon the existence of market efficiency.
The student should support the concept of Duration, be able to calculate the duration of various bond portfolios, and to construct immunized portfolios appropriate for different investor categories. The student should evaluate active bond portfolio management, from the standpoint of interest rate predictions and various possible market anomalies.
The student should compare the macroeconomic factors that affect security prices. The student should judge the roles of fiscal and monetary policy in influencing interest rates. The student should determine why some industry groups are more affected by macroeconomic factors than others.
The student should be able to value a firm using the appropriate dividend discount model and the dividend discount-derived price/earnings ratio. The student should evaluate the limitations of each of these models.
The student should be able to: calculate various risk-adjusted return measures, and use these measures to evaluate investment performance; and decompose excess returns into components attributable to asset allocation choices.
Using the media as a tool, watch Finance television programs on:
CNBC
CNN
PBS
Listen to some of the news radio stations to keep informed of financial and other news:
Also be familiar with these business magazines:
Barron's (Weekly . Saturday)
Business Week
MOST IMPORTANT . read at least one of these every day:
Investor's Business Daily
The Financial Times
The New York Times
The Wall Street Journal
Ret_SP_tbill_bnds_ fall 2016.pdfGoogle Sites
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