MSF 706: Investment Analysis Master Syllabus
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Course Website: Canvas
Course Description
This course is designed to expose students to modern portfolio management and asset valuation. The focus is on institutional investing although the material is also relevant for individuals. The goal is to offer an unbiased presentation of different investment styles, present current empirical evidence in investments, and for students to use modern investment strategies and risk-management tools to manage equity and fixed income portfolios. In particular, students will learn the concepts of trading, risk and return, asset allocation, diversification, pricing models, portfolio performance evaluation, and market efficiency.
Program Outcomes
- Technology and Analytics Skills: Our students will develop advanced technology skills to 1support decision-making processes in finance.
- Technical Skills and Knowledge: Our graduates will demonstrate and apply technical financial knowledge.
- Ethical Standards: Our students will understand the importance of ethical and professional standards in finance.
- Professional Communications: Our students will communicate effectively to professional audiences in both written and oral forms.
Course Objectives
- Evaluate and explain the risk and return trade-offs in finance.
- Identify components, strategies, and techniques utilized in portfolio management and asset pricing.
- Apply tools and strategies to reduce risk within a portfolio by means of diversification, portfolio optimization, and efficient frontier estimation.
- Make decisions on which assets would contribute to a well-diversified portfolio in order to achieve a desired rate of return.
- Conduct research necessary to construct, manage, and evaluate equity fixed income portfolios and evaluate their performance.
- Manage a portfolio by performing asset allocation, security selection, and performance evaluation tasks.
- Interpret investor preferences and evaluate their choices based on their attitude toward risk.
Textbooks and Class Notes
Required book for the course is:
Zvi Bodie, Alex Kane, and Alan Marcus. Investments. McGraw-Hill Higher Ed. McGrawHill, 12 edition, 2021
The following are suggested textbooks and readings for the course:
Regular reading of the Wall Street Journal, the Economist, Business Week, Fortune, Forbes, Barron’s
The class notes will be self contained, but the textbooks and other papers or articles posted on Blackboard will be very useful to help clarify the topics discussed in class. The slides will be posted on Blackboard before each class, but may change afterwards depending on the actual content that was covered and discussed during class.
Course Contents and Tentative Schedule (Sample)
The table below presents the topics covered in each week of the class.
Problem sets and class exercises will be easier to solve using Excel and/or a financial calculator. Knowledge of Excel or a comparable program is extremely useful.
Any course feedback on how you think the course is evolving (including constructive criticism and suggestions) and potential additional topics to discuss in class will always be welcome.
The following timeline and coverage is subject to change depending on the pace of the course, student feedback, and potential current topics relevant to the course material.
| Date | Topic | Readings/Assignments |
| Week 1 |
|
BKM 5 (1 optional) |
| Week 2 |
|
BKM 5 |
| Week 3 |
|
BKM 6 |
| Week 4 |
|
BKM 6 |
| Week 5 |
|
BKM 7 |
| Week 6 |
|
BKM 9 and 18 |
| Week 7 |
|
BKM 24 |
| Week 8 |
|
Evaluation and Grades
The final grade will be an average of the following items, weighted as noted:
| Problem Set Assignments | 20% |
| Portfolio Project Unit 1 | 12% |
| Portfolio Project Unit 2 | 12% |
| Portfolio Project Unit 3 | 12% |
| Portfolio Project Unit 4 | 12% |
| Portfolio Project Unit 5 | 12% |
| BMC Portfolio Management Tutorial | 15% |
| Participation | 5% |
| Total | 100% |
Grade cut-offs will be determined according to the following table
| Grade | Score (rounded) |
| A+ | 97-100 |
| A | 94-97 |
| A- | 90-93 |
| B+ | 87-89 |
| B | 83-86 |
| B- | 80-82 |
| C+ | 77-79 |
| C | 70-76 |
The grade cut-offs may be lowered based on the overall score distribution of the class.
Problem Sets (Individual) 20%
The problem sets will help you build your skills in computing various measures of return on multi year investments, estimating the investors utility, identifying and investors optimal choice amongst risky portfolios, calculating portfolio variance, estimating the weights of minimum variance portfolios, tracing the efficient frontier, and identifying the best optimal portfolio. Each of the problem set assignments are to be completed and submitted individually.
Portfolio Project (Group) 60%
Your portfolio project is the largest part of your grade and the most important part of this course. It is divided into five parts and to be completed in collaboration with your group members.
The first part of your portfolio project will challenge you to practice collecting, computing, and manipulating data from online sources. You will use real data to complete the assignment.
The second part of your portfolio project will help you in evaluating individual risk aversion. You will begin by completing a questionnaire to understand your own aversion to risk.
In the third part of the portfolio assignment you will estimate the efficient frontier of risky assets and use Markowitz optimization using the excel solver.
The fourth part of your portfolio project you will use regression analysis to estimate the CAPM beta and construct the securities market line (SML).You will also be applying a dividend discount model to expected return and assess whether a security is above (undervalued) or below (overvalued) the SML.
The fifth and final part of your portfolio project will have you comparing portfolio returns with a benchmark. You will compute the asset allocation (market timing) and securities selection contribution to the return of your portfolio. You will estimate a number of performance measures such as Jensen alpha, information ratio, Treynor measure, and the Sharpe ratio.
Your portfolio project submissions should include graphs, tables, and detailed explanation of your results. Work closely with your group members to provide specific and concise answers to the questions you are asked to answer.
Consult the Portfolio Project Rubric for specific details regarding grading for your portfolio project.
Portfolio Project Rubric
| Needs Improvement | Fair | Good | Excellent | |
| Calculations (25%) | Only some calculations are accurate and/or excess ambiguity exists in either steps taken to arrive at mathematical answers and/or methods selected to find solutions. | Most calculations performed with adequate accuracy but ambiguity exists in calculations. More precise and/or detailed execution needed. | Most/majority of calculations performed with accuracy and completeness. Steps are conveyed in a sufficient manner. Little or no ambiguity in mathematical calculations. | All calculations performed with accuracy and completeness. All steps are conveyed to arrive at solutions. No ambiguity in mathematical calculations and/or steps taken. |
| Technical Presentation (25%) | Graphs and/or tables maybe inaccurate and/or not informative. Graphing/display needs someof the following: title, proper styles and coloring, axis magnitudes, tick values/marks, x-label, y-label, annotation text, and points on the graph/table. | Graphs and/or tables are somewhat accurate and informative. Graphing/display includes some of the following: title, proper styles and coloring, axis magnitudes, tick values/marks, x-label, y-label, annotation text, and points on the graph/table. | Graphs and/or tables are accurate and informative. Graphing/display includes most of the following: title, proper styles and coloring, axis magnitudes, tick values/marks, x-label, y-label, annotation text, and points on the graph/table. | Graphs and/or tables are highly accurate and informative. Graphing/display includes title, proper styles and coloring, axis magnitudes, tick values/marks, x-label, y-label, annotation text, and points on the graph/table. |
| Technical Explanations (25%) | Interpretation of results in written format is only somewhat conveyed. Calculations, graphs, takeaways, and/or strategic or mathematical relationships may be ambiguous in explanations provided. | Interpretation of results in written format is mostly conveyed. Calculations, graphs, takeaways, and/or strategic or mathematical relationships can be mostly understood from explanations provided. | Interpretation of results in written format conveyed adequately. Calculations, graphs, takeaways, and/or strategic or mathematical relationships can be understood from explanations provided. | Interpretation of results in written format is very clearly conveyed. Calculations, graphs, takeaways, and/or strategic or mathematical relationships can be distinctly understood from explanations provided. |
| Overall Presentation and Strategy (25%) | Recommendations provided and strategic importance of the assignment is not clearly conveyed in the assignment submission. Evidence provided and connections are either not attempted or not clearly made between calculations and/or theory to provide practical application for investors to utilize. | Recommendations provided and strategic importance of the assignment is mostly available in assignment submission. Evidence and connections are made and/or attempted between calculations and/or theory to practical application for investors to utilize. | Recommendations provided and strategic importance of the assignment is available in the assignment submission. Evidence is and connections can be made between calculations and/or theory to practical application for investors to utilize. | Recommendations provided and strategic importance of the assignment is well crafted and on display in the assignment submission. Evidence is provided and connections are clearly made from calculations and/or theory to practical application for investors to utilize. |
BMC Portfolio Management tutorial 15%
Another component of the grading will be Bloomberg Market Concepts (BMC), a Bloomberg tutorial. Recently, BMC has been divided in multiple sections such as Core Concepts, Getting Started on the Terminal, and Portfolio Management. I have made the BMC Portfolio Management tutorial a part of this course. Signing up for BMC requires a code which will be provided in class. Upon completing this tutorial you will receive a certificate.
Administrative and Participation 5%
The administrative and participation aspects of the course include the following: an introduction during the first week of the class to get to know your classmates, a syllabus acknowledgment quiz to make sure that you’ve had an opportunity to review all the details of the syllabus, two peer evaluation’s and one reflection assignment.
Late Assignments
All assignments are due at the beginning of the class or as indicated in Blackboard. Submission will be through Canvas. If the assignment is to be discussed in class (working through harder homework questions, etc), no late assignments will be accepted after the beginning of the class. Otherwise, a late assignment will be considered but 25% will be immediately deducted from the assignment grade. Additionally, 25% of the total assignment grade will be deducted for every extra day after the assignment was due. Exceptions may be made if necessary due to illness or other George Mason University-approved emergencies.
References
- Zvi Bodie, Alex Kane, and Alan Marcus. Investments. McGraw-Hill Higher Ed. McGraw-Hill, 12 edition, 2021.
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