Investment and Portfolio Management (September 2016)

Department of Management Sciences

Investment and Portfolio Management

MGT531
Module Handbook

Investment and Portfolio Management (September 2016)

Investment and Portfolio Management (MGT531)

Instructor: Dr.Faheem Aslam
Assistant Professor
Faculty of Business Administration
Department of Management Sciences
COMSAT Institute of Information Technology, Islamabad
Contact: faheem.aslam@comsats.edu.pk
Class hour: Tuesday, 16:00 17:30
Wednesday, 16:00 17:30
Meeting: By appointment only or during the office hours (arranged prior to coming).

COURSE DESCRIPTION
This course will discuss the basic and advance theories, principles, and techniques of
investment analysis and portfolio management. The topics include the portfolio investment
process, asset allocation, portfolio construction, and portfolio performance evaluation.
Further it consists of describing the investment environment, the various developments in
investment theory, and the principles and practices of valuation. The analyses of fixedincome securities, equity securities, derivative securities, together with other securities.
Throughout the course, a global perspective will be emphasized.
This course will provide you with an in-depth introduction to investment analysis and
portfolio management. The overarching objectives are that students
(1) Gain a deep intuitive understanding of the concepts used in investment analysis,
(2) Learn the tools used in investment analysis, including excel modeling and regression
analysis, and
(3) Gain confidence in applying the concepts and tools in managing a portfolio.
A representative (but not exhaustive) list of topics includes:
Securities Markets
Investment Vehicles
Portfolio Theory
Risk and Return
Diversification
CAPM and other Asset Pricing Models
Equity Securities
Debt Securities
Derivatives

COURSE OBJECTIVE
The objective of the course is to equip the students with the theory and empirical evidence
relevant for investment analysis and portfolio management. An emphasis is placed on
understanding how an investment professional would allocate funds in a hypothetical
portfolio. Major topics include estimation of capital market parameters, trade-off between

Investment and Portfolio Management (September 2016)

risk and return, optimal portfolio selection, equilibrium asset pricing models, and delegated
portfolio management. Emphasis will be put on development of techniques that should be
part of the tool kit of those interested in becoming professional investors and/or researchers
in finance. The course material is tilted heavily towards equity markets a little will be
covered about fixed income markets and derivative securities.
LEARNING OUTCOMES
After studying this course the students will be able to investigate and analyze investment
environment, industrial setups and companies securities for investment purpose. After
analyzing the securities a hypothetical case of portfolio will be developed using different
securities. The portfolio making and managing is the most important skill in the world of
investment, which will be developed through this course. This will equip the students with
the skill of sound decision making whenever they for investment in their real life. This
course will sharpen the skills of the researchers in the field of finance. This course will give
equip the research students about the basic models, assumptions and tools in finance, which
will enable them to conduct their research in the field of finance.
MY TEACHING PHILOSOPHY
It is important to me that each of you is successful in this course. Do not hesitate to contact
me if there is anything unclear or if you have a question. If you think other students may
have the same question, then discuss in the class. Otherwise, e-mail me using the subject
"IAPM Question" and I will reply to you the next time I check my e-mail. Do not wait
until the last minute to work on assignments. Allow enough time to work on assignments
so that you have time to ask me questions. This way I can coach and mentor you to success.
TEACHINGS AND LEARNING STRATEGIES
Financial Econometrics Analysis skills will be developed in two ways:
First, the core material will be delivered in a conventional lecture format. The lectures will
be based on the chapters available in the book and some topics can be added other than the
text book.
Second, after a particular module has been completed there will be an assignment with
reference to real data set (mostly with respect to Pakistani financial markets/firms), so that
the ideas can be applied.
Finally, A large amount of finance functionality is built into Excel. This course offers
students the opportunity to deepen their Programming and spreadsheet skills.

PREREQUISITES

I will assign problem sets that require the use of Microsoft Excel. If you are planning
to work in the area of investment management, it is essential that you develop your

Investment and Portfolio Management (September 2016)

computer skills. I will assume that you know how to use spreadsheets to perform some
basic analysis.
I will assume at least a good understanding of basic notions in finance: the time-value
of money; return, risk and portfolio diversification; net present value etc.

CALCULATORS AND COMPUTERS

The nature of the subject matter requires significant amount of numerical computations.
Students are expected to bring a calculator to every class session and to all examinations.
Moreover, use of laptop computers in the classroom is highly encouraged.
RECOMMENDED BOOKS

Investment Analysis and Portfolio Management 10e by F. Reilly and K. Brown

(Cengage South-Western, 2012)
Essentials of Investments, 10th (or 9th) Edition, by Bodie, Kane, and Marcus
(BKM)

REFERENCE BOOKS

Managing Investment Portfolios, 3rd Edition (referred to as Mgmt Book

hereafter) Authors: John L Maginn, Donald L Tuttle, Jerald E Pinto and Dennis
W McLeavey Publisher: Wiley (ISBN: 978-0-470-08014-6)

Quantitative Investment Analysis, 2nd Edition (referred to as Quant Book

hereafter) Authors: Richard A DeFusco, D.W. McLeavey, J.E. Pinto, David E
Runkle, and Mark JP Anson Publisher: Wiley (ISBN: 978-0-470-05220-4)

Risk Management and Financial Institutions, by John C. Hull, Wiley, 3e, 2012

ASSESSMENT SCHEME
Attendance and Class participation (5%),
Quizzes and Assignment (20%),
Midterms (25%),
Final (50%)
OUTLINE
Week 1

Introduction to Entire course. The Investment Setting.

Week 2

Measures of Return and Risk

Risk and Diversification

Week 3

Selecting Investment in a Global Market

Week 4

Security Market Indexes, KSE-100 Index

Investment and Portfolio Management (September 2016)

Week 5

Efficient Capital Markets.

Week 6

An Introduction to Portfolio Management.

Week 7

Creating Efficient frontier and international diversification

Week 8

Mid Term

Week 9

An Introduction to Asset Pricing Models.

Week 10

Multifactor Models of Risk and Return.

Week 11

An Introduction to Security Valuation.

Week 12

Equity Portfolio Management Strategies.

Week 13

An Introduction to Derivative Markets and Securities.

Week 14

Evaluation of Portfolio Performance.

Week 15

Fundamental and Technical Analysis.

Weak 16

Behavioral Finance / EVT

*Almost all topics include Excel Labs.

ADVANCED TOPIC (TO BE CHOSEN)

If time allows, additional topics relating to portfolio management will be covered. Some
potential topics may include but not limited to CFA program, organization of mutual
fund industry, international investing, fixed-income securities, derivative securities,
Extreme Values and behavioral finance.
SUGGESTED READINGS
[1] Barras, L., O. Scaillet, and R. Wermers (2010, February). False discoveries in mutual
fund performance: Measuring luck in estimated alphas. The Journal of Finance 55 (4),
179216.
[2] Byrnes, N. (2010, dec). Are you a stock or a bond? Reuters Money.
[3] Cassidy, J. (2007, July). Hedge clipping. The New Yorker .
[4] Dybvig, P. H. (1988). Inefficient dynamic portfolio strategies or how to throw away a
million dollars in the stock market. The Review of Financial Studies 1 (1), 6788.
[5] Estrada, J. (2008). Black swans and market timing: how not to generate alpha. Journal
of Investing 17 (3), 2034.