Assistant Professor Kang Wenjin ( ) (Office) BIZ , (Phone)

Transcription

1 NATIONAL UNIVERSITY OF SINGAPORE NUS Business School Department of Finance and Accounting FIN3102A Investment Analysis Instructor: Assistant Professor Kang Wenjin ( ) (Office) BIZ , (Phone) Course objectives This course provides a comprehensive coverage of basic concepts, theories, applications and decision-making rules in financial investments. We shall cover fundamental analysis and security valuation on stocks, bonds, options and futures, as well as modern portfolio management. On completion, candidates should be conversant in investment management in preparation for careers in financial analysis and financial planning, investment banking, and corporate finance. Candidates should also be prepared for the Chartered Financial Analysts examinations in quantitative analysis, equity securities analysis and portfolio management. Basic text Reilly, Frank K. and Keith C. Brown, Investment Analysis and Portfolio Management, Eighth Edition, 2003, South-Western, (RB) Supplementary Readings Bodie, Zvi, Alex Kane and Alan J. Marcus, Investments, Sixth Edition, 2005, McGraw-Hill, (BKM) It is important that students come to class having read the financial news in The Straits Times. Students are encouraged to read Business Times, Asian Wall Street Journal, and other financial periodicals like The Economist as well. Continual assessment will also be based on the student s understanding and analysis of market issues. Students are therefore encouraged to interact and discuss current issues in the financial markets in their own informal groupings. Pre-requisites A strong foundation in Statistics (BZ1008/ST1131A) and Finance (FIN2004). Students are expected to already be familiar with the following topics in the basic text (RB): Security Valuation RB #10, 11 Risk, Portfolio Theory & CAPM RB # 7, 8

2 Course contents 1 Equity Valuation Fundamental Analysis Technical Analysis Efficient Market Hypotheses 2 Valuation of Fixed Income Securities Bond Fundamentals Bond Analysis and Valuation Bond Volatility Measures Bond Portfolio Management Strategies 3 Valuation of Derivative Securities Forward and Futures Contracts Option Contracts 4 Portfolio Management Equity Portfolio Management Strategies Portfolio Performance Evaluation Investment Assessment methods Tests (2) 50% ) individual credit Group tutorial 10% ] Group paper 15% ] group credit Group project 25% ] Assessment approach Students will be tested on their understanding of the prescribed body of knowledge as well as their analytical skills. The prescribed readings are basic requirements for the body of knowledge for this course. Students who have a good understanding of the prescribed readings should be able to pass the course. Students who aspire for an A grade would need to be able to interpret financial reports and analyse current market-relevant issues. Tests (50%) The format, time and venue may be determined by the lecturer. Group Work Requirements (50%) Students are to organize themselves into 5 small groups of about 6 members each and appoint a group coordinator who will communicate with the instructor on behalf of the group. The names of group members are to be submitted to the instructor by week#2. 2

3 There are 3 components: (1) submission of tutorials (10%); (2) of research papers (15%); (3) written project report and of project findings (25%). Group Presentation of Research Papers and (15% ) This will be evaluated on the amount of team learning, besides clarity of and the ability to motivate the class to learn together with the team. Therefore, having one student to dominate the entire delivery without reference to the rest of the team is not encouraged. Splitting the research papers/tutorials into segments and having each student present one part is not an indication of team learning as well. There is generally more team learning when the rest of the class participates in interactive learning. Group Project (25%) Each group is responsible for choosing a topic related to the course and writing a group report on the chosen topic. The report main text should be no longer than 15 pages (double spacing with at least 10 pitch) excluding exhibits. The report can be based on an article in a popular finance newspaper or magazine. However, it should include a more detailed analysis than the article itself. Or, the report can be a summary of various articles on the same topic. Each group should notify me the topic of the report by Week 6. I encourage you to ask me questions regarding this final group report. Please start to work on this group project as soon as possible. Each group must submit a project proposal to the instructor for approval by end of September. The final project report must be submitted at least one day before the. Group Tutorial (10% ) Tutorial #1: R&B #12 Q13, R&B #13 P9, R&B #14 Q24, R&B #15 Q3, R&B #6 Q21 P4 (Submit by Week 6) Tutorial #2: R&B #17 Q8, R&B #18 Q13 P7 P12 P13 P16 (Submit by Week 10) Tutorial #3: R&B #19 P9, R&B #20 Q4, R&B #21 Q5 P5, R&B #22 Q9, R&B #24 Q9, R&B #25 P6 (Submit by Week13) 3

4 COURSE OUTLINE Subject Description Assignment Group Activity WEEK 1 Fundamental Analysis R&B # History of Stock Markets 2. Stock Market Analysis 3. Industry Analysis 4. Company Analysis and Stock Selection 5. Quantitative Examples Read R&B #16 Form 5 groups and submit names to instructor Technical Analysis R&B # Assumptions of Technical Analysis (T.A.) 2. Advantages of and Challenges to T.A. 3. T.A. Rules and Indicators WEEK 2 Read R&B #6 WEEK 3 Efficient Market Hypothesis R&B #6 1. Forms of Market Efficiency 2. Tests of Market Efficiency 3. Implications of Efficient Capital Markets Read R&B #18 Read Folder #1 1. The Psychology of Risk 2. Behavioral Risk: Anecdotes and Disturbing Evidence 3. Behavioral Finance: Past Battles and Future Engagements WEEK 4 Bond Fundamentals R&B #18 Folder #1 1. Bond Features and Characteristics 2. Participating Issuers Read R&B #19 Read Folder #2 1. Alternative Measures of Risk 2. Value at Risk for the Asset Manager WEEK 5 Bond Valuation R&B #19 Folder #2 1. Bond Yields 2. Bond Valuations Read R&B #19 Read Manual An Introduction to Technical Analysis (RBR) readings in Folder #1, Group #2 readings in Folder #2, 4

5 COURSE OUTLINE Subject Description Assignment Group Activity WEEK 6 Term Structure of Interest Rates R&B #19 Manual 1. Determinants of Interest Rates 2. Term Structure Theories Present Folder #1 Group #2 Present Folder #2 Read R&B #19 Group #3 To prepare of Manual, RBR #HG4529Int MID-SEMESTER BREAK WEEK 7 Bond Volatility Measures R&B #19 1. What Determines Bond Price Volatility? 2. Duration measures 3. Determinants of convexity Read R&B #20 Group #5 before Group #3 Present Manual WEEK 8 Bond Portfolio Management R&B #20 1. Portfolio Strategies 2. Matched-Funding Techniques 3. Contingent Procedures Read R&B #22 Prepare for Test 1 before Project #1 Group #5 WEEK 9 Forward and Futures R&B #22 1. Hedging with Forwards and Futures 2. Optimal Hedge Ratio Test 1 (Sat 3pm) Read R&B #21, 23 Group #3 before Project #2 WEEK 10 Introduction to Options R&B #21 Option Contracts R&B #23 Project #3 1. Basic Valuation Concepts 2. Payoff Diagrams of Options 3. The Binomial Option Pricing Model 4. Black-Scholes Valuation Model Group #3 Read R&B #17 Group #2 before 5

6 COURSE OUTLINE Subject Description Assignment Group Activity WEEK 11 Equity Portfolio Management Strategies R&B #17 Project #4 1. Passive Strategies 2. Active Strategies 3. Style Investing 4. Asset Allocation Strategies Group #2 Read R&B #26 Read Folder #3 1. The Active vs Passive Debate: Perspectives of an Active Quant 2. The Reality of Hedge Funds readings in Folder #3, before WEEK 12 Evaluation of Portfolio Performance R&B #26 Folder #3 1. What is required of a Fund Manager? 2. Composite Portfolio Performance Measures Present Folder #3 Read R&B #25 Read Folder #4 1. Equity Style: What it is and Why it Matters 2. Asset Allocation: Management Style and Performance Measurement Group #5 readings in Folder #4, Project #5 WEEK 13 Investment R&B #25 Folder #4 1. What is an Investment Company? 2. Management of Investment 3. Types of Investment 4. Performance of Investment Group #5 Present Folder #4 Prepare for Test 2 6