Investment Analysis
Dr. Kee H. Chung, Visiting Professor, CAU
Louis M. Jacobs Professor and Chairman
SUNY at Buffalo
(e-mail) keechung@buffalo.edu
http://mgt.buffalo.edu/faculty/academic/finance/faculty
교수연구동 305 동 801 호
Office hour: 2:00-3:00 pm Tuesday
OBJECTIVES
This course provides you with a general understanding of the operation of capital markets and basic
analytical tools of investment management. Covered topics include portfolio theory, capital asset pricing
model, arbitrage pricing theory, market microstructure, equity valuation, efficient market hypothesis, option
pricing, and the valuation of fixed income securities. Through an investment project, you’ll gain an
additional insight on practical issues in investment and portfolio management.
PREREQUISITES: Financial Management & Introductory Statistics. Finance is mathematical and you will
need to utilize material developed in the prerequisite courses.
TEXT: Investments, by Zvi Bodies, Alex Kane, and Alan Marcus, Richard D. Irwin, Inc., latest US or Global
Edition.
PowerPoint: http://www.acsu.buffalo.edu/~keechung/Lecture%20Notes%20and%20Syllabus%20%28MGF
633%29/PowerPoint/
GRADING POLICY
Midterm Exam (30%), Final Exam (30%), Investment Project (20%), Class Participation and Attendance
(20%)
ATTENDANCE on every class meeting is required. Please do not be late for class. Punctuality is a virtue
ASSIGMNMENTS
I'll be assigning homework problems from the book. I choose problems that I think are "useful", in the sense
of helping you understand the material and prepare for exams. You should feel free to work on them in
groups.
CALCULATOR
You will live or die in this course by your financial calculator. In addition to the usual arithmetic operations,
a financial calculator can compute means, standard deviations, exponentials, log functions, and present and
future values of simple sums and annuities. An ability to compute yield to maturity (YTM) and internal rates
of return (IRR) is useful.
Useful Websites
Yahoo Finance: http://finance.yahoo.com
SCHEDULE
1
(Notes)
LN denotes “lecture note”
Topic 1
How Securities Are Traded (Chapter 3)
Homework problems: 3:4,5,7,8,9,14
Homework problems: 3:6,8,9,14
(These are corresponding problems in Global Edition of the textbook.)
Topic 2
History of Returns (Chapter 5)
Homework problems: 5:5,6(a)(b)(c),7,12
http://www.acsu.buffalo.edu/~keechung/Lecture%20Notes%20and%20Syllabus%20(MGF633)
/MorningstarCharts%201926-2006.ppt
Topic 3
Risk Analysis & Capital Allocation (Chapter 6)
Homework problems: 6:4,6-21
Topic 4
Optimal Portfolios (Chapter 7), Index Models (Chapter 8) & CAPM (Chapter 9)
Homework problems: 7:4-11, CFA Problems 1,2,3
9:3,4,13,14, CFA Problems 1,2
9:3,8,17,18, CFA Problems 1,2
(LN) Risk and Return
http://www.acsu.buffalo.edu/~keechung/CU%20Lecture%20Notes%20and%20Syllabus/Cha
pter%206%20-%20Risk%20and%20Return.doc
(LN) Minimum Variance Portfolio and Optimal Risky Portfolio
http://www.acsu.buffalo.edu/~keechung/Lecture%20Notes%20and%20Syllabus%20(MGF6
33)/Chapter%207%20-%20MVP%20and%20P%20Numerical%20Examples.doc
Excel Application
http://highered.mheducation.com/sites/0073530700/student_view0/chapter7/excel_templates.html
Topic 5
Equity Valuation (Chapter 18)
Homework problems: 18:4,6,7,8,11,17; CFA Problems 1,2,10
Equity Valuation (Chapter 22)
Homework problems: 22:8,10,11,14,20; CFA Problem 8
Excel Application
http://highered.mheducation.com/sites/0073530700/student_view0/chapter18/excel_templates.html
Exam
Topic 6
APT (Chapter 10)
Homework problems: 10:4,5,6,9; CFA Problems 1-8
Topic 7
Behavioral Finance and Efficient Market (Chapters 11 and 12)
2
Topic 8
Analysts’ Earnings Forecasts and Stock Recommendations
(LN) Recommendation of Security Analysts
http://www.acsu.buffalo.edu/~keechung/Lecture%20Notes%20and%20Syllabus%20(MGF633)
/Recommendations%20of%20financial%20analysts.ppt
Topic 9
Options Market (Chapter 20)
Homework problems: 20:5,6,7,8
Options Market (Chapter 17)
Homework problems: 17:5,6,7,8
Topic 10
Option Pricing (Chapter 21)
Homework problems: 21:6-12
Option Pricing (Chapter 18)
Homework problems: 18:6-12
Excel Application
Topic 11
Bond Analysis I (Chapter 14)
Homework problems: 14:4,5,6,7; CFA Problems 1,2
Homework problems: 14:6,7,8,9; CFA Problems 1,2
Topic 12
Bond Analysis II (Chapters 15,16)
Final Exam
3
Investment Project
 Each team consists of three students. Ideally, each team should have team members who are
good at data processing (Excel, SPSS, SAS, etc), write-up, and presentation, respectively.
 Each team has $1,000,000 to invest.
 Consider capital allocation, asset allocation, and security selection decisions and provide your
rationale for your decisions.
 Each team meets with me once or twice during the course to discuss your plan & methodology
and to update your progress.
 Turn in your research report (10 – 20 pages) and make in-class presentation (last week of class)
 You may consider the following factors in making your investment decisions:
Alpha
Beta
Intrinsic value
Correlation structure
PE ratios
Efficient frontier
Risk tolerance
Analyst recommendation
Earnings forecasts
Known market anomalies (e.g., size and book-to-market ratio)
4