Mgt 4412: Security Analysis & Portfolio Management
SYLLABUS
Management 4412A – Finance
University of Lethbridge
Spring, 2007
Instructor:
Class times:
Class Room:
Office:
Office Telephone:
Office Hours:
Email:
Robert Ironside, ABD Ph.D. (Finance)
Monday & Wednesday, 13:40-14:55
FA W514
E576
403-332-5244
Tuesday 10:00 to 12:00 PM, or by appointment.
robert.ironside@uleth.ca
PREREQUISITE: Management 3412 & 3470
COURSE MATERIALS: Investment Analysis & Portfolio Management, Frank K. Reilly &
Keith C. Brown, 8th Edition, Thomson South-Western.
An excellent supplementary text is Portfolio Construction, Management & Protection, Robert A.
Strong, Thomson South-Western, 2003.
COURSE OBJECTIVE: The purpose of this course is to introduce students to the theory and
practice of security analysis and portfolio management. Topics will include evaluation of equity
securities, bonds, and international investments and the role they play within a portfolio. The
course builds upon the material covered in MGT 3412 and MGT 3470. Specifically, we will
cover efficient markets theory, modern portfolio theory, asset pricing models, portfolio
management strategies, and portfolio performance evaluation. Attention will be given to
techniques used in building, managing, and evaluating the performance of portfolios of securities
within the constraints faced by institutional investors. Portfolio construction will be analyzed
through problems, assignments, and the study of research findings. Strategic and tactical asset
allocation decisions will be discussed within the framework of institutional portfolio
management.
COURSE REQUIREMENTS:
Grades will be determined by:
2 Midterm Exams (25% each)
1 Comprehensive Final Exam
2 Group Assignments
50%
35%
15%
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Mgt 4412: Security Analysis & Portfolio Management
Course Format:
Lectures, class discussion, assignments, group presentations and examinations. The format of the
course will be an interactive-lecture format with frequent group presentations. Students are
expected to actively participate in class, having read the assigned material prior to class. Given
the volume of material, it will be impossible to cover all of the content during class.
Academic honesty
You are expected to adhere to the highest professional and ethical standards. Please become
familiar with the University Policy on academic dishonesty. Those caught cheating will be
penalized to the maximum permitted by University policy, which includes a final course grade of
“F” and referral to the Dean for disciplinary action.
Class Schedule:
January
8
Class Orientation & Introductions
10
The Economic Environment
Readings:
1. Real Estate & the Post-Crash Economy, John Mauldin,
http://www.2000wave.com/
2. Forecast 2007: The Goldilock Recession, John Mauldin,
http://www.2000wave.com/
3. Quaterly Review & Outlook, Fourth Quarter, 2006, Van Hoisington &
Lacy H. Hunt, in John Mauldin’s Outside the Box
15
Ch 2
The Asset Allocation Decision
- The Investor life cycle
- The portfolio management process
- The Investment Policy Statement
17
Ch 3
Selecting Investments in a Global Market
- The case for investing globally
- Global investment choices
- Historical measures of risk & return on alternative investments
22
Prepare for 1st Group Presentation
24
Prepare for 1st Group Presentation
29
Groups 1 – 5 (Alternative Investments)
31
Groups 6 – 10 (Alternative Investments)
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Mgt 4412: Security Analysis & Portfolio Management
February
March
5
Ch 4
Organization & Functioning of Securities Markets
- What is a market?
- Primary capital markets
- Secondary markets
- Some Terminology
7
Ch 5
Security Market Indexes
- Uses of indexes
- Factors in the construction of market indexes
- Stock-market indexes
- Bond-market indexes
- Composite indexes
- Fundamental indexes (fad or future)
12
Midterm Exam #1 (Chapters 1 – 5)
14
Review Midterm exam
Group #1: Canadian Exchanges
Group #2: US Exchanges
19
21
Reading Week (No Classes)
Reading Week (No Classes)
26
Group #3: Going Public – The IPO
Group #4: The Future for Investors by Jeremy Siegel
28
Ch 6
5
Group #5: Behavioral finance
Group #6: Bubbles & Crashes
7
Group #7: “The Intelligent Investor” by Benjamin Graham
Group #8: Warren Buffet “The Sage of Omaha”
12
Ch 7 An Introduction to Portfolio Management Strategies
- Risk & return for a single asset
- Risk & return for the two asset portfolio
- Risk & return for the multi-asset portfolio
14
Ch 7 An Introduction to Portfolio Management Strategies
- Adding the risk-free asset
- The Capital Market Line (CML)
Efficient Capital Markets
- Why should the market be efficient?
- The forms of market efficiency
- Tests & results
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Mgt 4412: Security Analysis & Portfolio Management
March
April
19
Ch 8 Introduction to Asset Pricing Models
- The CAPM & the Security Market Line
- Relaxing the Assumptions
- Empirical tests of the CAPM
21
Ch 8 Introduction to Asset Pricing Models
- Systematic risk and return
- The effect of size, P/E & leverage
- Fama French Three Factor Model
26
Exam #2 (Chapters 6 - 8)
28
Group #9: Ubiquity – Why Catastrophes Happen by Mark Buchanan
Group #10: The (Mis)behaviour of Markets by Benoit Mandlebrot
2
Ch 17 Bond Fundamentals
- Characteristics of bonds
- Rates of return
- The global bond market
4
Ch 18 Analysis & Valuation of Bonds
- Bond valuation
- Computing yields
- Calculating future bond prices
- Interest rates & term structure
9
Stat Holiday (No Classes)
11
Ch 19 Bond Portfolio Management Strategies
- Bond portfolio strategies
- Implications of Capital Market Theory & the EMH
16
Ch 25 Evaluation of Portfolio Performance
- Treynor Measure
- Sharpe Measure
- Jensen Measure
- Other issues in portfolio evaluation
Students are expected to complete exams and projects at the scheduled times. Make-up exams
will not be given except in extreme situations and with prior notification.
Physical or Learning Disabilities:
Please let me know if you have a physical condition or learning disability that may impact your
academic activities in this class.
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Mgt 4412: Security Analysis & Portfolio Management
Grades
A+
95-100
A
90-94
A86-89
B+
B
B-
82-85
78-81
74-77
C+
C
C-
70-73
66-69
62-65
D+
D
F
58-61
50-57
00-49
Group Projects
Each group will be comprised of four students. Each group will prepare and present two topics
to the class. The first presentation will be 12 minutes long and it will concisely summarize a
particular type of investment. The second presentation will be approximately 30 minutes long
and it will consist of an in-depth report on one of a wide variety of topics germane to the field of
investments.
Topics for Presentation #1:
Group Topic
#
1.
Capital trusts. Example: BNS Capital Trust; HSBC Capital Trust, RBC Capital Trust
2.
Exchange traded funds: iShares S&P/TSX 60 Index Fund; iShares S&P/TSX Capped
Composite Index Fund; iShares S&P/TSX Capped Income Trust Index Fund
3.
Exchange traded funds: iShares Scotia Capital Real Return Bond Index Fund; iShares
Scotia Capital Short Term Bond Index Fund; iShares Scotia Capital Universe Bond
Index Fund
4.
Exchange Traded Funds: iShares MSCI EAFE 100% Hedged to CAD $ Index Fund;
iShares S&P 500 Hedged to CAD $ Index Fund; iShares Dow Jones Canada Select
Dividend Index Fund
5.
Income Trusts: Boston Pizza Royalties Income Fund; Canadian Oil Sands Trust;
Boardwalk Real Estate Investment Trust
6.
Split Share Corp: Big 8 Split Inc; Top 10 Split Trust
7.
Investment Funds: Brompton Advantaged Equal Weight Oil & Gas Income Fund;
Brompton Advantaged Tracker Fund; Canada Trust Income Investments
8.
Principal Protected Notes: Business Development Bank of Canada Global Equity
Index Notes; CIBC Series 1 Blue Chip Notes; CIBC Nikkei 225 Notes
9.
Principal Protected Notes: RBC Enhanced Return (Leveraged) Bear Notes due March
31, 2008 linked to the iShares Dow Jones U.S. Real Estate Index Fund
10.
Principal Protected Notes: RBC 90% Principal Protected Notes linked to a basket of
Base metals; RBC Cash-out Reverse Convertible Notes due June 29, 2007 linked to the
Goldman Sachs Natural Gas Excess Return Index;
For each presentation, you must:
1. Identify the primary investment characteristics of each asset
2. Identify the risks particular to each asset
3. Identify what type of investor the asset is most suitable for
4. Email your PowerPoint presentation to the class the evening prior to your presentation.
Your PowerPoint presentation will form the core of the study material for the students
that are not presenting that day, so please ensure that your PowerPoint is concise,
comprehensive and suitable for study purposes.
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