HOFSTRA UNIVERSITY
FRANK G. ZARB SCHOOL OF BUSINESS
“Educating for Personal and Professional Achievement”
DEPARTMENT OF FINANCE
FINANCE 205 INVESTMENTS
(Graduate Course)
Fall 2013 Semester, Sec. 01, Wed 1:00 -3:20 PM, CRN: 91927, CV Starr 0104
INSTRUCTOR
OFFICE HOUR
LOCATION OF OFFICE
PHONE EXTENSION ON CAMPUS
E-MAIL ADDRESS
Dr. Ehsan Nikbakht, CFA, FRM
Tue and Thur 2:15 PM to 3:45 PM
Weller 116A
516-463-5679
finezn@hofstra.edu
GENERAL INFORMATION
Location of Department Office
Telephone number of Department
Department Chairperson
221 Weller Hall
463-5698
Dr. K.G. Viswanathan, CFA
DESCRIPTION OF COURSE
An examination of models and techniques used to conduct security analysis. Extensive coverage of
fundamental approaches to the valuation of stocks is provided. Topics include cash flow valuation
and relative valuation techniques to analyze markets, industries and companies. Earnings
forecasting and stock selection are covered in depth. The use of technical analysis for making
investment decisions is investigated. Equilibrium asset pricing and the efficient capital markets
hypothesis are also discussed. Coverage of bond fundamentals including pricing, yield computation,
risk in fixed income securities along with the calculation and implications of duration and
convexity. An introduction to the pricing of derivative securities and their investment uses is
provided.
PREREQUISITES OF COURSE
Prerequisites: FIN 203, QM 203
READING SOURCES
• Textbook: Bodie, Zvi, Kane, Alex and Alan J. Marcus Investments (the latest edition)
• Computer Proficiency: Students are expected to be proficient in using spreadsheets and
finance calculators. Excel is intensively used and required.
PROGRAM-WIDE LEARNING GOALS
Knowledge Base: Each student will demonstrate knowledge of the theories, models, and analytical
tools relevant to his/her major field of study
• Given a course assignment or exam, each student will be able to apply analytical tools or
strategies relevant to his/her discipline to problem solve.
Communications: Each student will effectively communicate orally and in writing.
• Each student will be able to produce a written project that meets all course requirements and
is informative, analytical, well written, and uses appropriate citations (footnotes and
bibliography).
Critical Thinking: Each student will be able to identify, analyze and solve complex business
problems.
• Given problems that need to be solved, each student will be able to identify and apply
methods that are appropriate to his/her discipline to problem solve.
INSTRUCTOR’S COURSE-SPECIFIC LEARNING GOALS
Each student will learn how to retrieve financial data from Bloomberg and other sources as
available and use them for stock valuation and analysis through selected Excel apps such as Solver.
SCHOOL OF BUSINESS POLICY ON MAKEUP EXAMINATIONS
To be eligible for a makeup examination, a student must submit to the instructor written
documentation of the reason for missing a scheduled examination due to medical problems or death of
an immediate family member. The instructor (not the student) determines whether and when a makeup
is to be given. If a makeup examination is to be given, the instructor will determine the type of
makeup examination. If the student misses (for any reason) the scheduled makeup examination,
additional make-ups are not permissible.
UNIVERSITY POLICY ON INCOMPLETE GRADES
When requested by the student, the instructor may grant, at her/his discretion, a grade of Incomplete
(‘I’). An ‘I’ grade should be given only when unforeseen circumstances prevent the student from
completing course work on time. As part of the normal final-grade process, the instructor must
submit an ‘I’ grade online to the Office of Academic Records with a default grade, the grade the
student will receive if the missing work is not completed. The default final grade must be a letter
grade or a permanent ‘I’; a UW is not an acceptable default grade. In unusual circumstances, the
faculty member may submit an ‘I’ grade without prior discussion with the student. The instructor
will decide the time frame in which the student will complete the required course work. However,
the deadline may not exceed one calendar year from the close of the semester or session in which
the course was taken. A student will not be allowed to attend the regular class meetings at the next
offering of the course. The instructor will inform the student of the completion requirements and
terms.
The instructor is required to submit a grade for the student within 30 days after the student has
submitted work to fulfill the terms specified. If the instructor cannot oversee the completion of the
incomplete work with the student, the instructor will arrange for oversight within the department
with the Dean’s permission. If the incomplete work is not completed by the deadline, the ‘I’ grade
will convert to the default grade previously submitted by the instructor.
UNIVERSITY POLICY ON ACADEMIC HONESTY
Academic dishonesty is a serious ethical and professional infraction. “Hofstra University places
high value upon educating students about academic honesty. At the same time, the University will
not tolerate dishonesty, and it will not offer the privileges of the community to the repeat offender.”
Please
refer
to
the
Undergraduate
Policy
at
http://www.hofstra.edu/pdf/Faculty/Senate/senate_FPS_11.pdf for details about what constitutes
academic dishonesty, including plagiarism, and Hofstra’s procedures for handling violations.
DEPARTMENT STATEMENT ON ACADEMIC HONESTY
The Department of Finance is dedicated to maintaining the highest level of academic honesty in all
of its classes. The University Policy on Academic Honesty states that expulsion from the University
is a possible punishment for academic dishonesty. The University Policy also states that students
"must avoid not only cheating, but the very appearance of cheating." Activities such as looking at
the examination of another student, talking, or passing notes during examinations give the
appearance of cheating, and therefore will be regarded as cheating. Submission of assigned work
that is identical in any abnormal way to the work of another student is subject to reasonable
interpretation as cheating. Students knowingly providing work to others are as guilty of cheating as
those who accept their work. Please see Blackboard for more information on the definition of
plagiarism. (For further information on academic honesty, please refer to the "Policy on Academic
Honesty" in the Hofstra University General Bulletin. )
STUDENT WITH DISABILITIES STATEMENT
If you believe you need accommodations for a disability, please contact Services for Students with
Disabilities(SSD). In accordance with Section 504 of the Rehabilitation Act of 1973 and the
Americans with Disabilities Act of 1990, qualified individuals with disabilities will not be
discriminated against in any programs, or services available at Hofstra University. Individuals with
disabilities are entitled to accommodations designed to facilitate full access to all programs and
services. SSD is responsible for coordinating disability-related accommodations and will provide
students with documented disabilities accommodation letters, as appropriate.
Since
accommodations may require early planning and are not retroactive, please contact SSD as soon as
possible. All students are responsible for providing accommodation letters to each instructor and for
discussing with him or her the specific accommodations needed and how they can be best
implemented in each course.
For more information on services provided by the university and for submission of documentation,
please contact the Services for Students with Disabilities, 212 Memorial Hall, 516-463-7075.
METHODS OF EVALUATING STUDENTS
Class participation is strongly recommended. Students use desktops and resources when available in
the classroom (or their laptops) to participate in discussion and problem solving. There will be two
exams in this course – a midterm exam and a final exam. The final exam is cumulative of all
chapters, readings, assignments, and discussions that we had in class. Assigned projects will be
collected as part of your portfolio for course evaluation. See below for the breakdown of the
components to determine a final grade.
No extra credit or extra assignment will be considered in final evaluation.
Midterm Exam
Final Exam: Cumulative
Project and Participation
Total
30%
40%
30%
100%
Industry and Company Analysis: A required assignment
1. Week 1: Students are formed in groups of two in the first meeting of the course.
2. Weeks 2: By the end of the second session, each group will choose two industries with four
companies from each industry. The choice of the firms is discussed among the student and
must be approved by your professor.
3. Week 4: Using Bloomberg data (or other sources if Bloomberg is not available to you), each
group will prepare a four page report evaluating the two industries they choose for study.
Among topics you should cover in this section are:
a. Discuss the strengths and weaknesses of each industry.
b. Collect the historical and current performance data for each industry using selected
ETFs or other industry indexes. If you are in a class room equipped with Bloomberg
Database, the instructor will show you how to import data from Bloomberg to your
Bloomberg Excel. If Bloomberg is not available, other sources could be used for
this section.
c. Identify the major players in each industry.
d. Evaluate the emerging regulations that may affect the industry .
e. Determine the industry trend/s and whether you are bullish, bearish or neutral on
each industry.
4. Week 6: Using data extracted from Bloomberg or other sources, choose the two firms from
each industry with the highest Sharp ratio or the least CV ratio (or the best performance
based on other indicators as discussed in class.)
5. Week 8: Using stock valuation methods leaned in this course, determine and report a value
for the stocks under your study. With a 5% margin of error in stock valuation, determine if
you should include the stock/s in constructing your portfolio. The concept of margin of
error in the choice of stocks will be discussed in class. You many change your choice of
stocks as you make progress if needed.
6. Week 10: Using portfolio diversification methods learned in this course, determine the best
asset allocation among the stocks under your study. Note: You need to run many iterations
to derive your most efficient portfolio.
7. Week 12: Prepare a volatility report for the stocks under your study based on the materials
covered in the course. You may use a moving average standard deviation for this purpose.
8. Week 15: Each group will be given up to 15 minutes to give a final oral presentation about
the industries/firms under study as outlined above.
9. A final written report is submitted to your professor in the last day of your class.
FALL 2013 SEMESTER
COURSE CALENDAR
Week
1
2
M
Date
9/2
W
9/4
W
Topic
Labor Day. University Closed.
Classes begin on 9/3
We meet on Sept 4th (Note: only evening
classes are not in session.)
Chapter 1-4 and Review
9/11
Chapter 1-4
3
4
W
W
9/18
9/25
5
6
7
8
9
10
11
12
13
14
15
W
W
W
W
W
W
W
W
W
W
W
10/2
10/9
10/16
10/23
10/30
11/6
11/13
11/20
11/27
12/4
12/11
Chapter 6-7
Chapter 9-10
Chapter 9-10
Chapter 17
Chapter 18
Chapter 11, 12
Chapter 14
Chapter 15
Chapter 16
Chapter 20
Thanksgiving Recess – NO Classes
Cases
Presentation
16
W
12/18
Assignment
N/A
Odd Numbered Problems
(ONP)
ONP 1-11
ONP 1-11
ONP 1-11
ONP 1-11
ONP 1-11
ONP 1-11
ONP 1-11
ONP 1-11
ONP 1-11
ONP 1-11
ONP 1-11
Group Discussion
Power Point slides for your
group project and the final
project are due
Finals Week for ALL classes
All items on the syllabus are tentative and subject to change at the instructor’s discretion.
.
COURSE OUTLINE
(Note: Depending on the edition you may have, the chapter numbers may vary.)
I. A Quick Review of TVM Application
Logistics for the course
Review of Financial environment
Investment environment . Different types of securities and the organization and operation of
securities markets and a discussion of the construction and characteristics of major security
market indexes.
Text: Chapters 1-4.
II.
Asset Pricing Models
Risk retunr, investors’ risk preferences and the equity risk premium. Coverage of portfolio
risk and return concepts. Development and coverage of the Capital Asset Pricing Model
(CAPM). Discussion of applications and empirical issues related to Index Models.
Text: Chapter 5 (pages 127-138), Chapters 6-7, Chapter 9 (pages 280-293) and Chapter 10
III.
Fundamental Analysis
Cash flow and relative valuation techniques for the analysis of industries and companies. The
significance of unique industry and company attributes are stressed. Issues related to using
financial statements for assessing the earnings potential and risk of firms. Coverage of cash
flow valuation models. Economic significance of Price/Earnings, Price/Book, Price/Sales and
other relative valuation techniques are presented.
Text: Chapters 17 and 18
IV.
Market Efficiency, Behavioral Finance and Technical Analysis
Efficient markets and significance for fundamental and technical analysis is presented. Recent
advances in behavioral finance are discussed. Coverage of the underlying assumptions of
technical analysis and some of some common approaches used by technicians.
Text: Chapters 12 and 11
V.
Bond Fundamentals and Valuation
Fixed income securities. Valuation and characteristics of fixed-income securities are covered.
Measurement and application of duration and convexity are discussed. A discussion of the
term structure of interest rates is also provided.
Text: Chapters 14, 15 and 16 (pp. 512-526).
VI.
Introduction to Derivative Securities
Application and pricing of options, futures and forwards is provided. The role of these
derivatives in managing risk in investment decisions is stressed.
Text: Chapters 20 (pages 671-690) and 22 (pages 759-774).