Finance 454 Portfolio Management

Spring 1999


Dr. Gudikunst (E-mail: )

Suite G Room 459

Office Hours: Mon., Wed., Friday 10:00 a.m.-12:00 noon and

Mon. and Wed., 3:00-4:30 p.m.

other times by appointment

Campus Telephone: 232- 6387


Text: (text) International Investments, 3rd Edition by Bruno Solnik

Addison-Wesley Publishing 1996

(new) The New Finance by Robert Haugen

Prentice-Hall 1996

Reference: Fin 312 textbook


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 course dealing with advanced topics in investments and management of investment portfolios. Topics will include evaluation of equity securities, bonds, options and futures contracts 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.


Course Grading:


Assignments and Quizzes 50%

Mid-Term Exams (2) 30%

Final Exam 10%

Article Review 10%


Article Review Requirement: Each student will select, read and make a class presentation on an article dealing with a portfolio management strategy. The article should be from a professional journal, such as, Journal of Portfolio Management, Financial Analysts Journal, Journal of Fixed Income, Journal of Finance, Journal of Business, Financial Management, or others approved by instructor. Journal article should be selected and reported to instructor by Friday, April 9, 1999. Written review is due by April 30, 1999.


Fin 454, Spring 1999

Week of: Topic and Reading Assignments Study Problems

Jan. 27

Introduction to Managing Investment Portfolios

READINGS:(text) Chap. 17 and 4


Feb. 1

Markowitz General Portfolio Model and CAPM

READINGS: (text) Chap 4

Ch. 4(Q 2, 4)



Feb. 8

Capital Asset Pricing Model and APT Factor Models

READINGS: (text) Chap 5, 6 and 7

Ch. 5(Q 10, 13)

Ch. 6(Q 6, 8)

Feb. 15

Empirical Testing and Market Efficiency

READINGS: (text) Chap 7 and 16 (new) Chap 1-4

Ch. 7(Q 12,13, 14)

Feb. 22

Inefficient Markets and Equity Selection Strategies

READINGS: (new) Chap 5-7

Ch. 7(Q 15)


Mar. 1

Foreign Exchange and Investing Internationally

READINGS:(text) Chap 1, 2 and 3

***EXAM 1 ***

Ch. 1(Q 4, 7, 9)

Ch. 2(Q 1, 3, 9)

Mar. 8

Equity Selection, Mutual Funds and Performance

READINGS: (text) Chap 8, 16

Ch. 8(Q 3, 4)

Ch. 16(Q 1, 3, 6)

Mar. 15-19



Mar. 22

Asset Allocation- Strategic and Tactical

READINGS: (text) Chap 17

Handout assignment

Mar. 29

Bond Investing Portfolio Strategies

READINGS: (text) Chap 9, 10

Ch. 9(Q 7, 8, 9)

Ch. 10(Q 2, 3, 5)

Apr. 5

Managing Bond Portfolios: Asset-Liability Management

READINGS: (text) Chap 10 and 11

Ch. 10(Q 9, 10, 13)

Apr. 12

Managing Portfolios with Options and Futures

READINGS: (text) Chap 12 and 13

***EXAM 2 ***

Ch. 12(Q 4, 6, 15)

Ch. 13(Q 1, 5, 10)

Apr. 19

Managing Portfolios: Managing Currency Exposure

READINGS: (text) Chap 14

Ch. 14(Q 1, 6, 7)

Apr. 26

Overview of Portfolio Management

Guest Speakers and Case Study

To Be Assigned

May 3

Student Portfolio/Project Presentations


Final Exam

12:00 class- Fri. MAY 14, 1999 @ 2:00 pm

1:00 class- Tues. MAY 11, 1999 @ 2:00 pm






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.