FINC 452 (001)
INVESTMENT MANAGEMENT
Syllabus – Fall Quarter 2013
Wednesday 6:00-9:00 pm
Corboy Law Center, Room # 423
Dr. Swasti Gupta-Mukherjee
Phone (O): 312-915-6071
E-mail: sguptamukherjee@luc.edu
Office: Maguire # 554
1 East Pearson, Chicago, IL 60611
Office Hours: After class and by appointment
Webpage: http://homepages.luc.edu/~sguptamukherjee
Note: The best/fastest way to contact me is by email
This syllabus contains the policies and expectations I have established for FINC 452. Please read the
entire syllabus carefully before making a decision on continuing in this course.
Course Objectives:
My goal in this course is to help you develop a way of thinking about and framing investment
decisions at the basic level. The course is designed to introduce the investment process, portfolio
management, and the functioning of capital markets, especially focusing on how it impacts
investment decisions on the buyers in financial market. The basics of asset valuation will be covered
by mainly focusing on equity and fixed-income securities. The objective of this course is also to
enhance your ability to follow and interpret financial news relevant to investments and your financial
goals like retirement saving etc. Ethical issues relating to the topics will be discussed when relevant.
Although much of the course will focus on what I perceive to be the practical applications of these
topics, we will also step back to see how the topics fit in a more general (or what you might perceive
to be theoretical) and “big picture” framework.
The primary emphasis of the course is on the design of common stock portfolios, but other
investments will be included. Some alternative investments, like private equity and hedge funds, will
be discussed using cases as the primary learning method. Many students find this course very
quantitative and work-intensive in terms of time and effort. Please note that this course assumes
proficiency in basic probability and statistics, regression analyses and algebra. A working knowledge
of Excel is also assumed. Specifically, this course will introduce the following topics:



Portfolio Theory and Portfolio Choice: A broad coverage of the theory and practice of
how investors analyze risk and return of securities and portfolios and the risk-return trade
off.
“New” Portfolio Theory: A discussion of the efficient markets hypothesis, the “Chicago
school” of economics and recent empirical evidence, with a brief overview of the new
stream of behavioral finance
Asset Pricing Models: The Capital Asset Pricing model and others
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 Alternative Investments: An introduction to the classes of investment companies,
characteristics and performance evaluation, various alternative investment vehicles like
private equity and hedge funds, their roles and ethical considerations
The above topics include all the core investment principles covered in a basic investments course at
the graduate level in a top tier university. However, given the wide spectrum of interesting topics
that falls under the umbrella of the term “investments”, you should also be aware of what the course
does not address. For example, the course does not address:
 Details of individual security valuation and selection (i.e., this is not a course about stock
picking)
 Discussion and project experience in day-trading or any form of “technical trading” (i.e.,
trading based on short-term market fluctuations without attention to changes in fundamental
factors related to the economy, industry or company)
The best way to clarify your expectations for the course if needed is to discuss them with me at the
beginning of the quarter. In some cases, if your expectations are a better fit with another course
offered at the school, I will be happy to advise you accordingly.
Revision of Syllabus
While revision of the syllabus will be avoided during the semester, any necessary revisions (usually
minor) will be preceded by reasonable notice to the students. Notice of such changes will be by
announcement in class or by email.
Textbooks/Reading:
Required: Class notes taken by students to accompany presentation slides
Recommended: Bodie, Z., A. Kane, and A. J. Marcus, Investments (9th Edition)
Note: You are advised to entertain plans of skipping the textbook purchase only if you are confident
of attending all classes and taking notes in class!
Required: Wall Street Journal (online or print)
Optional Texts:
Seigel, Jeremy, Stocks for the Long Run
Malkiel, Burton G., A Random Walk Down Wall Street
Lo, Andrew, A. Craig MacKinlay, A Non-Random Walk Down Wall Street
Shleifer, A., Inefficient Markets: An Introduction to Behavioral Finance
Shiller, R., Irrational Exuberance
Class Notes:
Please treat the slide handouts as nothing more than a rough roadmap for the class. They will not
contain detailed discussions conducted in class and students are strongly advised to take notes of
what is covered. The textbook will be used as support material to accompany class notes, especially
for practice problems. However, additional discussions in class are part of the syllabus for exams. I
will typically make electronic versions available on Sakai in advance of class. In case you are absent
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in class when any material is handed out, you will be responsible for obtaining a copy of what I gave
to the class and making sure that you are aware of the detailed discussions held. I may also hand out
and discuss extra reading material consisting of newspaper and magazine articles relevant to the
course.
Some Web Resources:
http://finance.yahoo.com
http://www.bloomberg.com
http://www.nasdaq.com
http://www.morningstar.com
Special Needs:
Any student with special needs should bring this to my attention at the earliest, and no later
than the second week of class.
Grading Scheme:
Grading Weights
Exam #1
Exam #2
Portfolio Project
Case Reports (2)
Class Participation
Peer Evaluation
TOTAL
20%
20%
20%
20%
10%
10%
100%
Final course (letter) grades will be awarded according to the following grading scheme:
[93 , 100] = A
[90 , 92.9] = A[87 , 89.9] = B+
[83 , 86.9] = B
[80.0 , 82.9] = B[77 , 79.9] = C+
[73 , 76.9] = C
[70.0 , 72.9] = C[65 , 69.9] = D+
[60 , 64.9] = D
<= 59.9 = F
Exams:
Procedures: Bring a calculator and pencil/pen. Note that using a scientific calculator is advantageous
for some of the numerical problems covered in the course. Financial calculators are discouraged.
You will not be asked to answer numerical problems in exams that require financial calculators. A
cheat sheet is allowed for the tests, and it must be contained on one side of a letter-sized sheet
of paper. You can include anything handwritten on ONE side of the sheet. It has to be turned in
at the end of the exam. No cutting and pasting of photocopied materials; no stick-em notes; no
multiple layers on one page, etc.
The exams will be non-cumulative and will include all topics and materials discussed in class. The
questions will include a mixture of non-numerical/theory and numerical problems. Please note that
any topics which may not be in the textbook but are discussed in class are fair game for
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examinations. Eg:-, any recent news from WSJ discussed during lectures in class. Attendance in
class is the best preparation for exams.
Laptops, palm pilots, books and notes are not allowed for the exam. The best preparation for the
exams includes reviewing the key issues discussed in class, in the readings and in the handouts,
reviewing the problems in the homework assignments, using the book as a reference for the more
difficult concepts and suggested readings.
Makeup exam policy:
Makeup exams are very difficult to administer in a manner fair to the entire class, so the policy for
the course is NO MAKEUP EXAM. Valid excuses for missing any of the two exams are
unforeseen emergencies such as accidents, illness, death in the family etc.
If you have a valid reason for missing any of the exams, the 20 % weight of the exam will be
reallocated. In this case, your final grade will be based on your performance on the other exam, class
participation, and peer evaluation as follows:
- Exam #1 (35 %), Class Participation (12.5 %), Peer Evaluation (12.5 %)
Note: If you do not have a valid excuse for missing an exam, it will count as a zero.
A student who misses both exams will automatically fail the class.
Attendance:
Attendance is crucial for understanding the material. Everything covered in the lectures is fair game
for exams. You are strongly advised to attend every class. Exceptions may be important
appointments like interviews, illness or a family emergency. While I certainly won’t grade your
attendance in the class, it will impact your class participation grades.
Homework:
I strongly recommend that you do a preliminary reading of the chapter before it is covered in class,
and that you do the homework to solidify your understanding. The performance on the numerical
sections in the exams will depend on the degree to which students keep abreast of the reading and
homework assignments. I have provided two alternative platforms for you to utilize homework
assignments for attaining course objectives, where you can choose to use one or both:
(1) You can register for an account on McGraw Hill Connect (~$50) or ConnectPlus (which is
pricier and includes online eBook access) by going to the following course link
http://connect.mcgraw-hill.com/class/sgm_finc_452_001_fall_2013
I have created a web-based assignment for each topic covered in class, primarily for
numerical concepts. In this web-based platform, you can get automatic feedback and
corrections on assignment questions. You can choose to submit your completed assignment,
in which case I will get a report. However, I will not use these assignments/reports for
any grading purposes since they are meant primarily for interactive learning and practice.
(2) For those of you who like the feel of pen on paper, I will post “traditional” homework
assignments focused on numerical concepts, along with solutions on Sakai. You do not need
to turn in the assignments. You should make serious attempts in trying the homework
problems before referring to the solutions.
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Cases:
Cases should be prepared in groups of four to five students. Smaller groups are allowed
depending on the situation but groups of more than six members are not permitted. Please come to
class prepared to discuss any aspects of the cases assigned. I will randomly ask groups/individuals to
discuss their thoughts on any of the case questions, and the discussions will factor heavily into the
class participation grade. I will hand out an attendance sheet on the days when cases are discussed.
You will indicate to me that you have come prepared to discuss the case by signing your name
on the sheet only if you have read and prepared the case. I will not call on students who do not
sign the attendance sheet. It is usually a good idea to make brief notes of your analysis for each case
question to bring to class, and you can use them for reference during class discussion. More details in
cases are included in the document Case Guidelines.
Case Presentation/Discussion:
Each team will sign up for one case on which they are assigned primary responsibility for offering
summary and insights and advancing classroom discussion. Cases will generally have two/three
teams assigned, depending on section sizes and number of teams. I will assign the responsibilities
for each of the two/three groups for a case once the groups are formed & each team has
volunteered for a case. Case sign up is by sending me an email and I will confirm assignments on a
first-come-first-served basis for the first three teams that email me. A team representative should
email me and include the names of his/her team members in alphabetical order. Whenever
possible, I will try to accommodate preferences for the cases depending on availability.
The group case presentations will be (max.) 15 minutes per presentation to start a case discussion.
Generally, the groups will lay out the essentials of the case setting, offer and support their views
about key problems and issues raised by the case, and respond to comments by others during the case
discussion. Only clarifying questions from the audience will be allowed during the presentation. The
last group to present will then initiate a discussion and analysis of the prior groups’ findings esp. as it
pertains to their own conclusions, followed by general thoughts and discussion. Other groups are
advised to note questions or alternative points of view they may have for all the presenting groups.
After the last group initiates the conversation, the discussion will be open to the whole class,
including the audience questions for any group. Healthy debate is strongly encouraged!
About a week before each case discussion, I will post on Sakai a few pertinent questions about the
case. These questions are not intended to be a comprehensive summary of the issues that could arise
during the case discussion, but I hope they will be useful when thinking about the case and in
stimulating discussion.
Case Reports:
Cases should be worked and handed in neatly on the stated date in the schedule or as announced.
Each group should turn in ONE case write-up including a cover page with the names of the
students who worked together on the case. The report should be concise and should not exceed 3-4
pages of text with additional pages for appendices, tables and figures if needed. Each group can
choose to turn in reports for any two of the four cases Case #1, #2, #3 and #4 covered in class
(and take responsibility for at least one case, as mentioned earlier). The grading of all case write-ups
will depend on both the substance of what you write and also on how you write it. I will not grade
cases based on any ‘expected’ answers to case questions, but on the consistency, rigor and effort that
reflects in your reports.
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The groups are strongly advised to turn in reports on the due date. In the interest of fairness, any
report that is turned in late will be graded out of a maximum of (100% - No. of days late x 10%), i.e.,
you lose 10% of the maximum grade per day that you are late. Since this is a group submission, there
will be no exceptions based on individual emergencies. Only hard copies of the reports will be
accepted. Do not email case reports.
Given that case preparation is a group activity, there may be some unfortunate instances of one or
more group members shirking their responsibilities. In this case, you are advised to make private
notes of each group member’s team contributions, and fill out confidential peer evaluations at the
end of the semester accordingly. In an extreme case of a group member completely failing to
contribute to the team’s goal and sort out conflicts, I might be forced to ask them to work
individually. Please note that working on cases alone is extremely challenging, so the teams are
strongly advised to do their best in achieving their shared goals for the course. You are also advised
to involve the instructor only when you feel that a serious team conflict cannot be resolved in an
amicable manner within the team.
Extra-Credit Opportunity:
Turning in more than two case reports by an individual or a group can count towards EXTRACREDIT for each optional case report submitted (= Max. 3% of total grade for each extra report).
Portfolio Project:
The project for the course is based on the online portfolio simulation game called Stock-Trak.
Additional details regarding the rules and requirements you need to follow and complete with regard
to this game will be included in a separate handout. The expectations for the project write-up are also
specified in the handout Project Guidelines. You should form groups of four to five students for
the class project, and this group is advised to be identical to the case group. Each group should
turn in ONE project report at the end of the quarter.
Project Presentations
All the groups will make 8-10 minute presentations of their portfolio projects in the penultimate class
of the quarter.
Class Participation:
All students are expected to come to class prepared to discuss the assigned readings or case for the
class. For cases, be sure to read and think about the preparation questions. These questions will form
the basis for class discussion. You will indicate to me that you have come prepared to discuss the
case by signing your name on the sheet only if you have prepared the case questions. In case a
student is found to be falsely indicating that they are prepared for the class, they will be penalized
50% of their class participation grade. Further details for class preparation pertaining to case
discussions will follow in a Case Guidelines document. Your class participation will be judged
based on the quality and quantity of your input.
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Peer Evaluations:
Teamwork is a necessary part of succeeding in most professions, and certainly in management.
Towards the end of the semester, each student will evaluate every other group member individually
on participation and attendance in group meetings, contribution to group preparation, case write-ups,
and the overall rating as a team player. Each student will be asked to fill out strictly confidential
peer evaluation forms grading the other group members. The Peer Evaluation forms are available
on Sakai. This is to encourage a proportionate allocation of effort and responsibility among the
group members. If a group has serious and valid complaints about a team member, I reserve the right
to ask the student to leave the group and work individually.
Academic Integrity:
It goes without saying that Loyola’s high standards for academic integrity will be strictly followed
during this course. No form of cheating and plagiarism will be excused. If you become aware of any
violations of the code of conduct you must take whatever steps are necessary to stop the violators.
You are to cite any material that you use for your cases/papers. Some of the material in this course
has been used before. You should not consult with students from prior years, their case notes, project
write-ups, or any other material that was made available to them. Any such consultation constitutes
plagiarism and violates the norms of acceptable conduct in this course.
Plagiarism on the part of a student in academic work or dishonest examination behavior will result
minimally in the instructor assigning the grade of "F" for the assignment or examination. In addition,
all instances of academic dishonesty will be reported to the appropriate authorities. You may not
submit in fulfillment of requirements in this course any work submitted, presented, or used by you in
any other course.
Please make sure that you understand the standards of academic honesty and integrity outlined in
Loyola’s policy.
Classroom Conduct
Your behavior should be respectful of the learning environment in the classroom. Each lecture
begins on time. Coming in late is strongly discouraged and repeated tardiness (like repeated early
departures) will not be ignored. Please turn off your cell phones and/or pagers etc. before entering
class. Laptops should be used in class only for class activities such as taking notes. They should
not be used to check email, surf the web, or to do other non-class activities during class time. All
students in the class must treat others with civility and respect and conduct themselves in a way that
does not unreasonably interfere with the opportunity of other students to learn.
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GOOD LUCK!
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Week - Date TOPIC #
TOPIC
Book Chapter
SUBMISSIONS
MODULE A
1 – Aug 28
1
Introduction; Risk, Return and Risk Aversion; Capital Allocation
between Risky and Risk-free Assets
Ch 5, 6, 7
Topic 1 Assignment posted on
McGraw Hill Connect/Sakai
2 – Sep 04
2
Portfolio Theory; Diversification
Ch 7, 8
Topic 2 Assignment posted on
McGraw Hill Connect/Sakai
3 – Sep 11
3
Asset Pricing Models; Efficient Markets and Behavioral Finance
Case #1: “Yale University Investments Office (2006)” (#9-807-073)
Ch 9, 10, 11, 12
Case #1 Report due at beginning
of class;
Topic 3 Assignment posted on
McGraw Hill Connect/Sakai
4 – Sep 18
Review for Exam #1
Case #2: “Dimensional Fund Advisors (2002)” (#9-203-026)
5 – Sep 25
Exam #1 (Syllabus: Topics #1, #2, #3)
Case #2 Report due at beginning
of class
MODULE B
6 – Oct 02
4
Equity Valuation
Ch 18
Topic 4 Assignment posted on
McGraw Hill Connect/Sakai
7 – Oct 09
5
Bond prices and Yields
Case #3: “The Boston Beer Company (2001)” (#BAB026)
Ch 14
Case #3 Report due at beginning
of class;
Topic 5 Assignment posted on
McGraw Hill Connect/Sakai
8 – Oct 16
6
Performance Evaluation; Professional Money Management
Case #4: “Rudy Wong, Investment Advisor (2010)” (#910N04)
Ch 24, 26
Case #4 Report due at beginning
of class;
Topic 6 Assignment posted on
McGraw Hill Connect/Sakai
9 – Oct 23
10 – Oct 30
Review for Exam #2
Group Project Presentations
Exam #2 (Syllabus: Topics #4, #5, #6)
Confidential Peer Evaluation
and Project Report due
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