Finance 617

Spring 2000

Bryant College

MANAGING INVESTMENT PORTFOLIOS

Prof. Arthur C. Gudikunst, Ph.D.

Suite G Room 458

Office Hours: Tues 3:00 to 5:00 pm and 6:00 to 7:30 pm,

Thurs 3:00 to 5:00 pm, other times by appointment

Campus Phone-(401) 232-6387 E-mail: agudikun@bryant.edu

Course Objectives

This is an advanced course in investment management. The course will build upon the student's background work in corporate finance, basic investments and statistics. Working knowledge of computer spreadsheets, personal computers and ability to use investment programs will be an integral part of the course.

This is a capstone MBA course dealing with advanced topics in investments and management of investment portfolios. Topics will include evaluation of equity securities, bonds, and international investments. The primary approach will be the evaluation of securities within the framework of return and risk measurement derived from modern portfolio and capital market theories.

The course will focus primarily on techniques of building and managing portfolios of securities. Equity portfolio construction strategies will be analyzed through problems, assignments and study of research articles. Bond portfolio management techniques will also be presented. Strategic and tactical asset allocation applications are discussed within the framework of institutional portfolio management.

Reference text from Fin 615 Investments

(BKM) Investments, Fourth Ed. 1999

by Bodie, Kane and Marcus Irwin Publishers

Required Texts:

(CAEM) The New Finance: Case Against Efficient Markets 2nd Ed. 1999

by Haugen Prentice Hall

(ISM) The Inefficient Stock Market 1999

by Haugen Prentice Hall

(MIP) Managing Investment Portfolios 1990

by Maginn and Tuttle Warren, Gorham and Lamont

Course Outline and Assignments

Week of:

Jan 26 Equity Investing: Markowitz Portfolio Model

Readings: (BKM) Ch. 6, 7, 8 (MIP) Ch. 1,2

Problems: Ch. 6 (8, 9, 10); Ch. 7 (1-8); Ch. 8 (13-16)

Feb 1 Capital Asset Pricing and Arbitrage Pricing Models

Readings: (BKM) Ch. 8, 9, 10 (MIP) Ch. 9

Problems: Ch. 9 (5-11); Ch. 10 (11, 12)

Feb 8 Efficient Market Theory and the Case Against It

Readings: (BKM) Ch. 11, 12 (CAEM) Ch. 1-6

Problems: Ch. 11 (1-7); Ch. 12 (23, 24)

Feb 15 Equity Portfolio Management Strategies

Readings: (BKM) Ch. 23 (CAEM) Ch. 7-9

Problems: Ch. 23 (1, 6)

Feb 22 Portfolio Performance Evaluation and International Investments

Readings: (BKM) Ch. 24, 27 (ISM) Ch 1-6 (MIP) Ch. 14

Problems: Ch. 24 (4, 6); Ch. 27 (1, 7)

Feb 29 Managing Portfolios and International Investing

Readings: (BKM) Ch. 26 (ISM) Ch. 7-15

Problems: Ch. 26 (1-4)

Mar 7 Asset-Liability Management and Strategic Asset Allocation

Readings: (BKM) Ch. 28 (MIP) Ch. 4,5,7

Problems: Ch. 28 (5)

Mar 14 *** Spring Vacation ***

Mar 21 Bond Portfolio Management/Bond Investing

Readings: (BKM) Ch. 13 and 14 (MIP) Ch. 6(pg. 2-29)

Problems: Handout Assignment

*** MID-TERM Examination ***

Mar 28 Bond Exotica - Mortgage-backed, Convertibles, Floating Rates and Junk

Readings: (BKM) Ch. 15

Problems: Handout Assignment

Apr 4 Bond Portfolio Management: Active, Immunized and Dedicated

Readings: (BKM) Ch.15 (MIP) Ch. 8

Problems: Case Assignment

Apr 11 Derivatives in Portfolio Management

Readings: (BKM) Ch. 19, 22 (MIP) Ch. 11 (overview)

Problems: Problems: (BKM) Ch. 19 (8, 15); Ch. 22 (4, 13)

Apr 18 Tactical Asset Allocation and Market Timing in Portfolio Management

Readings: (BKM) Ch. 27 (again), (MIP) Ch. 13

Problems: Ch. 28 (8), Handout Assignment

Apr 25 Portfolio Insurance Strategies and Derivatives Use

Readings: (BKM) Ch. 19, 22 (MIP) Ch. 11

Problems: Handout Case

May 2 Student Research Presentations and Course Wrap-up

May 9 *** Final Examination ***

 

GRADING:

Mid-term Examination 20%

Final Examination 15%

Research Paper 20%

Assignments/Projects 45%

 

Other Course Assignment

Research Paper on Investment Strategy:

Based on the review of at least four (4) relevant journal articles or a general-public oriented book dealing with the selected topic, prepare a minimum six (6) page report on the application of an investment portfolio-building or trading strategy. Report should cover a detailed description of the portfolio building technique and a thorough review of the quantitative evidence from the articles, including description of database, timing and testing techniques. The paper will be subject to presentation in class during final week of scheduled class meetings. Paper is due on or before the class meeting day on May 2, 2000.

Topic Selection and References Due on April 11, 2000.

Final Report on May 2, 2000

 

 

PORTFOLIO MANAGEMENT DATABASES and PROJECT ASSIGNMENTS:

During the early weeks of the semester, students will work with instructor to develop:

(1) a database of US domestic stocks and companion foreign stock market equity securities,

(2) a database of stock and bond market indices for both the United States and international markets,

(3) a database of stock, bond and international equity mutual funds.

Student responsibility will be to follow instructions carefully in gathering data and constructing an Excel spreadsheet file in format given by instructor. Students will submit files either on disk or through E-mail.

Upon completion of separate databases, instructor will assign a series of projects for student analysis. Assignments will focus on:

1. Mutual fund analysis and basic return/value calculations

2. Mutual fund performance analysis

3. Strategic asset allocation analysis: using market indices data

4. Tactical asset allocation analysis

5. Equity portfolio construction using CAPM

6. Equity portfolio construction using Factor Models

7. Equity portfolio construction based on market inefficiency

8. others as instructor determines.