COURSE: INVESTMENTS (FNC 402) Lahore School of Economics SYLLABUS. I. Introduction to Financial Assets & Markets

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1 COURSE: INVESTMENTS (FNC 402) Lahore School of Economics SYLLABUS I. Introduction to Financial Assets & Markets II. III. IV. Primary & Secondary Markets (Trading Mechanisms) Risk & Return Considerations Fixed Income Securities: Bonds Valuation & I.R Analysis V. Equities: Valuation VI. VII. VIII. Equities: Analysis & Strategy Technical Analysis Basics Derivatives: Futures & Options Basics Instructor: Salaar BBA-E Investments - Spring Salaar - Course Outline 1

2 INVESTMENTS Lahore School of Economics Course: Investments (FNC 402) Class: BBA-3 Section: E Term: Spring 2012 Course Instructor: Asst. Prof. Salaar Farooq Teaching Associate: TBA Pages=08 Course Objective The main objective of this course is to introduce and develop a functional understanding of Investments. Students will be introduced to the structure of Financial Markets as well as various key financial instruments offered in these markets and their application. Emphasis will be placed on products generally offered in most countries. These will include Equities, Debt, and basic Derivative products. In addition, this course will cover basic Risk considerations when dealing with these financial instruments, and an introduction to Portfolio Theory. The course perspective is that of a finance manager facing decisions and the aim is to learn conceptual and analytical skills needed by such managers in the field of Investments, to improve their decision-making using tools offered by such financial instruments. Also included is a description of the global financial environment and an introduction to investment strategy, as well as an evaluation of recent trends and events in the context of financial theory. Students will also get primary exposure to tracking and making sense of global as well as local financial markets information. This course takes an application approach which includes topics covering basic hedging techniques and investment strategies. In order to maximize learning in this course, lectures will involve real-world market applications, examples and interactive discussions which can not be covered in the text. In addition, Critical and Analytical thinking in the field of finance will be developed through practical examples and interactive discussions. Teaching Strategy The teaching methodology includes lectures, discussion sessions, quizzes, inclass assignments, mini-cases, short videos, and group presentations. BBA-E Investments - Spring Salaar - Course Outline 2

3 Core Reading List 1) C.P.Jones: Investments, Analysis & Management, 9 th edition NOTE: Book is available at Galaxy Book store 2) M. J. Pring: Introduction to Technical Analysis (Optional) Breaks NOTE: Course pack is available from photocopier Breaks are not scheduled during the 105-minute sessions. Attendance In order to maximize learning in this course, Attendance is emphasized. The lecture will involve real-world market applications, examples and interactive discussions which can not be covered in the text. In addition, Critical and Analytical thinking in the field of financial markets cannot be developed without practical examples and interactive discussions. NOTE: Students are advised to show up for class and keep up with the course material NOTE: Unannounced absences will have a negative impact on your grade. Group Project (STOCK MARKET GAME) Groups of 5-8 students will work on a real-time simulation of equities portfolios. The group will build and manage 3 different stock portfolios (Active, Passive & Index) on a weekly basis through the semester. A 1-Page Performance report on the portfolio will be required every 4 weeks according to the outline calendar. Detailed instructions are attached at the end of this outline. A Group presentation (10 min) on the equity portfolio with a topic focus and a 10 page report (1-1/2 line space, 12 Font) will be required at end of the semester. Students must form & sign-up their groups with TA by the first week. Checklist: a) Form your 5/8-student group & coordinate with TA b) Build 3 portfolios & select topic out of given choices c) Submit 1 page performance report according to calendar due dates. d) Submit 10-page paper & make presentation at end of semester. BBA-E Investments - Spring Salaar - Course Outline 3

4 Assessment Criteria Final exam: 40% (Cumulative) Mid-term exam: 25% Participation: 15% (Attendance 5% & Discussion 10%) *Group Presentation: 10% (Stock Market Game) Quizzes: 10% (Random Quizzes- 2 will be counted) *Every group has 5-8 students. General Class Rules Students are required to adhere to the following rules while class is in session. a) Mobile/Cell Phones must be switched off. b) Cross-talk is a NO-NO! c) Any action which disturbs the class is prohibited. d) Eating and drinking is not allowed. Contact Information & Office Hours Please feel free to visit the professor or TA for any questions, discussion or help regarding this course. Following are contact details: Asst Prof: Salaar Farooq (Office: J-7-D) Contact: salaar@lahoreschool.edu.pk LSE Burki: Extension: 246 (LSE Burki campus) J. Lect: Ms. TBA Contact: tba@lahoreschool.edu.pk, LSE : Extension: (LSE Burki campus) Note: Office Hours are as displayed on office door at J7D Good Luck & Happy Learning! BBA-E Investments - Spring Salaar - Course Outline 4

5 Lahore School of Economics COURSE: INVESTMENTS (FNC-402) BBA Section E: Spring 2012 Course Outline Updated: 29 th Dec, 2011 Lecture Lecture Sessions Chapters Session Details 1 Introduction, GDP & Yield Curve Investment Setting 1 Introduction, MD Handout, Group Formation, Lecture 2*w1 Understanding Investments Overview of Financial markets 1 Lecture, Discussion, 3 Investment Alternatives Product Types 2 Lecture, Discussion, 4*w2 Investment Alternatives Organization of products 2 Lecture, Discussion, 5 Indirect Investing Mutual Funds Basics 3 Lecture, Discussion, 6*w3 Indirect Investing NAV & Performance Evaluation 3 Lecture, Discussion, 7 Securities Markets Exchanges-Indices-Terminology 4 Lecture, Discussion, 8*w4 How Securities Are Traded 5 Lecture, Discussion, Bid-Ask, Orders, Acct Types 9 How Securities Are Traded Margins, MTM, Leverage, Mechanism 5 Lecture, Discussion, 10*w5 Returns & Risks From Investing Types of risk & Measurement (Review) 6 Lecture, Discussion, 11 Returns & Risks From Investing TR for Fx positions, Exchange R risk 6 Lecture, Discussion, QUIZ 1 12*w6 Bond Yields And Prices Pricing,Fisher Hypothesis & Y.Crve 18 MKT Analysis DUE Quiz, /Pblm sets 13 MID-TERM EXAM *** (all chapters covered) 14*w7 Bond Yields And Prices (immunize) Price Sensitivity/Duration/Hedging 15 Common Stock Valuation Pricing & Analysis 16*w8 Common Stock Valuation Multiple g model / Relative V.Tech. 17 Portfolio Theory Basic Introduction 18 Lecture, Discussion, 11 Lecture, Discussion, 11 Lecture, Discussion, 7 Lecture, Discussion, BBA-E Investments - Spring Salaar - Course Outline 5

6 18*w9 Portfolio Theory Port. Risk, Efficient Port Concept 19 Portfolio Management Basic Introduction- Asset Allocation 20*w10 Technical Analysis Intro 21 Technical Analysis Basics Indicators & Application (Signals) 22*w11 Derivatives- Futures Basics Concept-Terminology-Pricing 23 Derivatives- Futures Basics Basis risk & Hedging Gold, Stocks/Oil 24*w12 Derivatives- Options Basics Payoff profiles & Pricing 25 Derivatives- Options Basics Hedging techniques for Stocks 26*w13 Presentations Groups Presentations Groups *w14 FINAL EXAM (cumulative) 7 Lecture, Discussion, 21 Lecture, Discussion, 16 Lecture, Discussion, 16 Lecture, Discussion, QUIZ 2 20 Lecture, Discussion, 20 Lecture, Discussion, 19 Mkt Dashboard assgmt due 19 Mkt Analysis DUE Discussion, Make-up session Executive Summary & Report DUE CP & Viva Executive Summary & Report DUE CP & Viva WARNING: Reading before class is required. Random quizzes may be held without notice! NOTE: HO = Handout CP = Course pack MD = Market Dashboard *Lecture Format:- FIRST HOUR: (20-45 Mins) Market discussion, Market Analysis, Topic Discussion, Articles, Activities, Quizzes etc BREAK = 5-mins. refresher MAYBE! (But not scheduled.) SECOND HOUR: Lecture & Theory (Lecture may begin within the first hour after mins discussion session & continue in second half!) BBA-E Investments - Spring Salaar - Course Outline 6

7 Investments Lahore School of Economics Course: Investments Class: BBA-3 Section: E Term: Spring 2012 Course Instructor: Asst. Prof. Salaar Farooq Senior Lecturer: Ms. Zonaira Javed Pages=02 Group Project: INSTRUCTIONS Step 1 Recreate the Excel Stock Market Template Handout for 3 Stock Portfolios (Active, Passive & Index) Step 2 Go to or yahoo.com (finance) Pick stocks of your choice & find their symbols (given on the net) You may pick either Pakistan stocks or US stocks, but you cannot mix the two countries. You will be playing with $1,000,000 or Rs 10,000,000 in each portfolio. No. of stocks to pick: (in each portfolio) a) Active = 5 stocks b) Passive = 5 stocks c) Index = 1 share of index worth the same amount. Step 3 Fill out Excel sheets according to headings & keep record of the data on a weekly basis. (Mark to market as of Friday close values) Step 4 Hand in 1-page performance reports according to course outline DUE Dates Step 5 Before mid-term, start preparing the 10-page paper. Make presentation & hand in 10-page paper at end of semester according to course calendar. BBA-E Investments - Spring Salaar - Course Outline 7

8 BBA-Stock Market Game Investments Spring Salaar Project Layout Guidelines NOTE: GRADING WILL FOCUS HEAVILY ON ANALYSIS & LESS ON FACT COMPILATION Executive Summary Economic Analysis (Pakistan) a. Equity market (KSE) b. Interest rates & Inflation c. GDP and economic indicators World Overview (Analyze) a. World indices b. Interest rates, inflation, currencies, GDP, and commodities Portfolio Construction a. Construct 3 Portfolios of 5 stocks (Passive, Active and Index) b. Run Portfolios for semester (weekly data will be used) c. Explain Fundamentals of each stock & your forward view d. Calculate for Individual Stocks Intrinsic Values & Relative Valuation Stock Expected Returns Standard Deviations(Risk) Techincal Analysis signals (give analysis) e. Identify your mistakes & present an analysis of corrective measures f. Analyze your Performance using benchmarks Your Conclusion and Recommendation on each stock NOTES: a) Report should be written by YOU & not pasted from web or other sources. b) References must be provided when using information from other sources. c) YOUR Analysis of Fundamentals & Technicals in the presentation & report is of paramount importance for this project & will be graded heavily. GOOD LUCK IN TRADING STOCKS & ENJOY YOUR PROJECT! BBA-E Investments - Spring Salaar - Course Outline 8