My Stock-Trak account number is:
________________________.
FINA 469 – Investment Analysis and Portfolio Management
Spring 2009
Instructor: Dr. Donghang Zhang
Location and Time:
BA 450 TTH 11:00 – 12:15pm (Sect. 002)
BA 451 TTH 02:00 – 03:15pm (Sect. 003)
BA 750 TTH 03:30 – 04:45pm (Sect. 001)
Note: due to the seat limits, you are required to attend the section for which you are
registered.
Office Hours: TTH 12:15 – 1:45pm and by appointment
You are also welcome to stop by without an appointment if you have a question for
me and you happen to be in the building – I will be in my office with high
probability during regular work hours on weekdays. The only difference between
with and without appointments is that I occasionally can’t talk with you if you
don’t have an appointment. But I will give you higher priority over other
businesses whenever possible.
Office: BA 478
Phone: 777 – 0242
E-mail: zhangATmoore.sc.edu
Class Website: Blackboard – log-in required. Note that you will see two courses for
FINA469: one is the section (001, 002, or 003) that you registered for, and the other,
Section 000, is the combined section. All class postings, such as notes, homework
assignments, e-mail announcements, etc. will be available through Section 000. (If you
don’t see FINA469-000-SPRING-2009 when you log into Blackboard, please contact the
Blackboard support. If this can’t be resolved, please inform your instructor.)
Course Overview
This course provides an in-depth discussion of fundamental principals related to
investment analysis and portfolio management. Topics include investment environment,
equity valuation, fixed-income securities, portfolio theory, and option valuation.
Objectives of this class include understanding
⋅ how security markets function,
⋅ the trade-off of risk and return, and
⋅ how to develop investment strategies.
Students will be exposed to some real-world mechanics of investing. With the general
trend towards defined contribution pension plans in the U.S., most of us will have to
choose from an array of investments including stocks, bonds, money market funds and
mutual funds. As we move through the material in this course, it is a good idea to keep in
mind: “How what I do in class may help my real-world investment decisions?’
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It is important to be skeptical about investment advice you read in the popular press. There
are simply too many people who live on commissions off your investment dollars. One
ancillary goal of this class is to help you to understand and critically evaluate investment
advice from brokers and the financial press.
Course Prerequisites
Students are officially required to have taken FINA 363. You should know some basic
mathematics and statistics such as how to do differentiation, and how to calculate mean,
variance, and covariance. You should also know how to use Excel to do some spreadsheet
work. Some students may find the material in this class challenging in terms of
quantitative-analytical skills and work load. If you have trouble, please do not hesitate to
seek my help.
Required Textbook and Materials
Required Text: Essentials of Investment, Seventh Edition, by Bodie, Kane and Marcus
Calculator: You will need a calculator, preferably a financial one, to do homework and to
take quizzes and exams. (I compiled some simple instructions for Texas Instrument BA II
Plus financial calculator while teaching a different course, and I will post it on the class
website. But you don’t have to use this type of calculators. As a matter of fact, a scientific
calculator will work for our exams, although a financial one will provide some
convenience.)
The Wall Street Journal: You are strongly encouraged to read the WSJ. Please pay more
attention to Section C (Money and Investing), and focus on articles relating to stocks and
investment advice in general.
Grading
I understand the importance of grades to you. I will do my best to provide convenience
and help, if you have questions regarding the grading policy and/or your grades. The midterm exams and the final grades will be curved, if I see the need to do so. The curve will
depend on the performance of the class. I will use one curve for all sections, unless we
have reasons that suggest otherwise. Other grading components will not be curved.
The grading components will be as follows:
Grading Component
Regular Homework (3 of them)
Quizzes (3-5 quizzes, and one can
be dropped)
Computer Project
Midterm #1
Midterm #2
Final Exam
Investment Game
Class Performance
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Weight
12%
10%
7%
20%
20%
25%
5%
1%
Homework: The homework not only prepares you for the exams, but also helps you to
better understand the most important concepts. It’s necessary to do the homework on time
to keep up with the class. We’ll have three homework assignments, and they will be
equally-weighted to give you your homework grade. The homework will consist of
multiple choice questions and be conducted via Blackboard system. Late homework will
not be accepted unless you have a really (almost impossible) good excuse (this policy
applies to all other assignments). Group discussions are allowed and encouraged.
However, each student is individually responsible for all questions in each homework.
Quizzes: Three to five quizzes are designed to keep you up with the class. Each quiz
usually lasts 10 to 15 minutes at the beginning of class. You can drop one of the quiz
scores, and the rest will count toward your total quiz grade. Make-up quizzes can only be
scheduled if you have a really good excuse and solid proof. Questions for quizzes are from
class examples and end-of-chapter problems with very little modifications. The time and
coverage of each quiz will be announced in advance.
Computer Project:
I will provide some historical data on individual stocks. You will need to calculate holding
period returns adjusting for dividends and stock splits, to trace out the efficient frontier of a
risky portfolio, and to estimate the beta and factor sensitivities. Group work is allowed,
and the maximum group size is four. Each group only needs to turn in one report. Please
indicate all group members’ names, if you work as a group. You can choose partners for
this project from the other section, as long as it is clearly indicated on the report.
Exams: We will have two mid-term exams and one final exam. The midterms will not be
cumulative (except for core concepts). The final exam will be cumulative and cover all the
materials. The two mid-term exams will be scheduled in the evenings (please refer to
the class schedule on Blackboard for the time and dates) for 75 minutes, but the instructor
will stay for another 45 minutes if any students want to use some extra time. The classes
on the exam day will be cancelled, and I will hold additional office hours during that time.
If you have time conflicts for either mid-term due to other classes or university
responsibilities, you need to inform the instructor at the beginning of the semester. If you
have other classes or other university responsibilities during the scheduled exam time, you
can use any of the three class periods on the exam day to take the exam during the day, and
you can still have additional 45 minutes if you want to. If you want the benefits of the
additional time but don’t have time due to class schedules, you need to discuss this with
the instructor asap. For those who have a really good excuse (and with proof) to miss one
of the mid-term exams on the scheduled exam dates, two options are available: schedule a
make-up exam or the grading component of the missed exam will accrue to the final.
However, you can not just choose to miss one mid-term exam. If you plan to be out of
town on any of the exam dates, please let me know as soon as possible.
Investment Game
We are going to play a stock investment game during the semester. Each student will
invest $1,000,000 of "play" money through STOCK-TRAK. Except for a few restrictions,
STOCK-TRAK works like your online broker. We will start the game on January 19, 2009.
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The ending date of the investment game is April 27, 2009 (you can continue to use your
account for a couple of more weeks, but any trading beyond April 27, 2009 will not be
considered for any class-related evaluations). You can only gain access to trading if you
pay to open an account online at StockTrak’s website. You need to obtain the account
number from the instructor (otherwise you might trade with a guy from the Antarctica).
The game includes two phases. The first phase is the speculation phase. For the period
from January 19, 2009 to April 17, 2008, you can freely invest the $1,000,000 cash in your
account with one exception. The exception is that the instructor will periodically ask you
to trade certain types of securities as we move through the lectures and you have to follow
the instructions. The goal of this phase is to help you to understand different securities and
the risk-return relation.
The second phase of the game is the asset allocation phase. For this part, you are asked to
build a retirement portfolio for a hypothetical client. Here is the background information
for the client: the client is a professional individual contractor. His/her profession is
technology consulting, with most of his/her work from Microsoft. This person is in his/her
late 20’s, single and has no children. The $1,000,000 (or whatever left after the first phase
of the game) you will manage for him/her is all his/her savings. For simplification, let’s
assume that this person does not have a pension, 401(k) plan or any other retirement
accounts. So his/her portfolio will be used for his/her retirement. Assume for now that
you are hired to manage his/her portfolio. You need to build a portfolio which you think
will suit his/her needs by using StockTrak.
For both phases, students will be permitted to experiment different investment
strategies/ideas/tips, but I do encourage you to find related chapters in our textbook and
read them before you invest your “money”. Students need to follow all the restrictions set
up by StockTrak, your online broker. For example, please do notice that you need to pay
commissions to your broker (in addition to the stock purchase) each time when you trade.
And your account has to satisfy the margin requirements. You are encouraged to explore
StockTrak’s website (http://www.stocktrak.com/) to learn all the rules and help features.
You will be asked to turn in periodic updates throughout the semester. For each update, I
will give you instructions. For the speculation part, you will be asked to trade certain
securities such as stocks, bonds, mutual funds and options. These security purchase
instructions may or may not suit your goal, but it is your job to make sure you do not
deviate too much from your course. For some updates I will also ask you to think about
some asset allocation issues when it is near the end of the semester. However, there will
be no required trades for such required updates. At the end of the semester, you need to
build a retirement portfolio for your hypothetical client and turn in an update presenting
the portfolio. Instructions will be given for the main requirement for this (final) update
near the end of the semester.
Your grades for this investment game are based on the periodic updates, including the final
update for the asset allocations for the second phase of the game. For the grade of each
update, I will look for whether you turn in the update on time and how you satisfy the
requirements of the update. For the final update, which is likely to be worth more points
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than other updates, the quality of your portfolio will also be examined (in addition to the
usual requirements).
Your portfolio return until April 17 for the speculation part will NOT affect your grades
for the investment game. It would be philosophically wrong if we do not reward good
performance, but for the purpose of this class, too much emphasis on the returns over a 12week period is also not appropriate. As we all know, your attention and efforts will
improve your return (money managers do work for their pay checks), and at the same time,
a large part of your return for the speculation could be because of luck. To strike a
balance, I will not use your return for the 5% investment game grade, BUT you can
receive an “upgrade” of your final letter grade conditioning on (1) you portfolio return is
ranked among the top 20% of the class (all sections), and (2) after all regular grades are
counted, your point average is less than 0.5 away from the cutoff for the next level. You
may not need this booster at all, but you will never know. So as an insurance policy, and
for your personal bragging rights, go make some “money”!
Class Performance: We can not succeed without your input. I expect that all of you
prepare for each class in advance, come to class on time, take notes, ask questions, and
participate in class discussions (in class and online). I expect that you spend time outside
of class and study the materials. I expect that you have a positive attitude – you should not
simply give up when you find the materials challenging, and you should not only study a
few days before the exams. Note that I may periodically take attendance, and I reserve the
right to take into account your class attendance when I evaluate your class performance.
After all other grading components are counted, and if your point average is within 1 point
away from the cutoff for a better letter grade, I will decide whether you receive the 1% or
not. The 1% class performance grade is NOT need-based. It will be solely based on my
judgment of how you satisfy my expectations.
Class Website
The class website is a useful place where you can find the most recent announcements, and
download files such as homework assignments, solutions, class notes, old homework
assignments and old exams. Please make sure you can access and download files from the
website.
Class Notes: Class notes will be made available on the class website. These notes help you
not to get lost in class. However, in class notes I intentionally omit some materials that I
will discuss in class and may show up in exams and quizzes.
Discussion Forums: as an experiment for this semester, I will periodically open discussion
forums based on some topics in the real world and topics we cover in class. I encourage
you to post comments in those forums. Since this is uncharted area, I will provide more
guidance as we move through the semester, and your feedbacks are welcome.
Class E-Mail
Each student is required to have the e-mail account that is associated with the Blackboard
system up to date. And you should check that e-mail account regularly. I often send e-
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mail messages to the class using the Blackboard system. Any class requirements sent in
the e-mail messages through the Blackboard are considered delivered. At the beginning of
the semester, I will send a test message. Please make sure that your e-mail account is
working!
Class Format
Class topics will generally follow the textbook, though we may take some significant
detours where appropriate. I will post a tentative class schedule on the class website (it is
NOT attached to the syllabus so that we can have some flexibility). The schedule will give
you guidance on the topics of different lectures and the expected dates for each lecture to
be covered, but keep in mind that changes are expected for the longer term. It is important
that you periodically check the schedule and read the appropriate sections of the textbook
before each class. You can find the schedules for the mid-term and final exams in the
online class schedule. The final exam schedule is set by the university. We will not
modify these exam schedules unless we run into some very usual circumstances.
Providing lecture notes should not be construed as an invitation to ignore the book or skip
class—it’s just that I’d like your energies focused on understanding the most important
concepts and on listening to and digesting the lecture, not busily writing down what was
said a few minutes ago. I encourage you to write down additional notes to help you
decipher what my notes are supposed to mean.
University of South Carolina Honor Code
All forms of academic dishonesty are prohibited. These include cheating, plagiarism, lying
in academic matters, fraud, bribery, unauthorized access to tests and examinations. I
expect that all of you follow the highest possible interpretations of the honor code. Here is
a copy of the Honor Code:
It is the responsibility of every student at the University of South Carolina
Columbia to adhere steadfastly to truthfulness and to avoid dishonesty, fraud, or
deceit of any type in connection with any academic program. Any student who
violates this Honor Code or who knowingly assists another to violate this Honor
Code shall be subject to discipline.
Prediction of the Stock Market
Please write down your expert predictions of the future market performance:
• On Jan. 6, 2009 at the market close (when this syllabus is finalized),
o the Dow Jones Industrial Average (DJIA) was 8,769.70;
o the S&P 500 was 906.65 .
• On May 1, 2009,
o the DJIA will be:
;
o the S&P 500 will be
.
• December 31, 2009,
o the DJIA index will be:
;
o the S&P 500 will be
.
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