Hong Kong University of Science and Technology
School of Business and Management
FINA 3103 Intermediate Investments
Spring 2023
1. GENERAL INFORMATION
Instructor:
Email:
Phone:
Office & office hours:
Utpal Bhattacharya, Chair Professor, Department of Finance
ubhattac@ust.hk
+852 2358 8498
LSK 5007, by appointment
Teaching Assistant:
Email:
Phone:
Office & office hours:
Kelly Zhang, Department of Finance
kellyzhang@ust.hk
Class Dates and Venue:
Section L1: Tue and Thu, 1:30PM – 2:50PM in room 2406 (lift 17/18)
Section L2: Tue and Thu, 4:30PM – 5:50PM in room LSK 1011
Course Prerequisite(s):
Course Exclusion(s):
Course Add/drop deadline:
FINA 2203/2303
Not applicable
February 16, 2023
(Any late add/drop will not be considered, please contact your program office)
Canvas course site:
https://canvas.ust.hk/courses/48722
2.
LSK 5068, by Appointment
COURSE DESCRIPTION
This course studies the concepts and evidence relevant to the management of investment portfolios. Topics include
diversification, asset allocation, portfolio optimization, factor models, the relation between risk and return, trading,
mutual funds, performance evaluation, and various investment strategies (passive, active, using fixed-income and
derivatives).
3.
COURSE OBJECTIVES
You will learn how to trade on financial exchanges, how to allocate money across several different types of securities/assets
(how to invest rather than speculate), how to determine the fair price of a financial security, and how to determine
whether a portfolio manager is doing a good job. You will be introduced to various investment strategies (passive, active,
using fixed-income and derivatives)
4. COURSE LEARNING OUTCOMES
On successful completion of the course, students are expected to be able to
Course Intended Learning Outcomes (CILOs)
CLO1: Allocate money across different asset classes in a scientific manner.
Aligned Program Intended Learning
Outcomes (PILOs)
P3, P4
CLO2: Price financial securities on the basis of fundamental financial principles.
P1, P4
CLO3: Determine whether a portfolio manager is doing a good job.
CLO4: Understand various investment strategies (passive, active, using fixedincome and derivatives in the portfolios).
CLO5: Perform financial analysis using Microsoft Office Excel and the REUTERS
financial database.
5. COURSE TEACHING AND LEARNING ACTIVITIES
P3
P4, P7
P4, P7
Expected
contact hours
Study Load
(% of study)
In-class lecture and class assignments
40
40%
Projects
20
20%
Self-study and review
40
40%
100
100%
Weight (%)
20%
Aligned Course Learning
Outcomes
(CLO no in section 4)
CLO 1, 2, 3, 4, 6
00%
CLO 1, 2, 3, 4, 5, 6
30%
CLO 1, 2, 6
50%
CLO 1, 2, 3, 4, 5, 6
Course Teaching and Learning Activities
Total
Assessment Methods
Brief Description (Optional)
(Homework assignment, Exam,
Quiz, Class participation etc)
A. 4 projects
B.
Class Exercises
C.
Mid-Term Exam
Real-world projects based on what
practitioners actually do.
There is a class exercise (ungraded) in every
class.
D. Final Exam
Total
6.
STANDARDS FOR ASSESSMENT
A+, A, AB+, B, BC+, C, CD
F
Assessment Rubrics For Each Assessment
4 projects
100%
Excellent Performance
Good Performance
Satisfactory Performance
Marginal Pass
Failure
Real-world questions plus interpretations of answers given
Mid-Term Exam
Multiple-choice questions covering the first half of the course
Final Exam
Short questions covering the whole course
7.
COURSE CONTENT AND TENTATIVE TEACHING SCHEDULE
No
1
Date
Tue, Feb 7
Course Content
Introduction
2
Thu, Feb 9
Trading Securities
3
Tue, Feb 14
Risk and Return
4
Thu, Feb 16
5
Tue, Feb 21
Risk Aversion and
Capital Allocation
Homework 1 given
6
7
Thu, Feb 23
Tue, Feb 28
Portfolio Theory
8
Thu, Mar 2
9
Tue, Mar 7
10
11
Thu, Mar 9
Tue, Mar 14
12
Thu, Mar 16
13
14
Tue, Mar 21
Thu, Mar 23
15
Tue, Mar 28
16
Capital Asset Pricing
Model (CAPM)
Homework 1 due
Homework 2 given
Index Models
Readings
Slides
Syllabus
BKM 2-12
Slides
BKM 28-47, 71-77
Slides
BKM 111-130
Slides
BKM 130-137
Slides
BKM 147-166
Download and read the introduction of paper 2 from
http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1333
Slides
BKM 194-202
Slides
BKM 168-172, 202
APT and Other
Multifactor Models
Mid-Term Review
Homework 2 due
Midterm Exam
Portfolio
Performance
Evaluation
Homework 3 given
Efficient Markets
Hypothesis
Slides
BKM 204-213
Thu, Mar 30
Behavioral Finance
17
Tue, Apr 4
Fixed-Income
Securities
18
Thu, Apr 13
19
Tue, Apr 18
Term Structure of
Interest Rates
Homework 3 due
Managing FixedIncome Portfolios
20
Thu, Apr 20
Futures Markets
21
Tue, Apr 25
Options Markets
Options Valuation
Homework 4 given
22
Thu, Apr 27
Grand Review
Homework 4 due on
May 2
Final Exam
Slides
BKM 258-274
Slides
BKM 283-309
Download Bond Fun.xls from CANVAS
Slides
BKM 312-317
Download Term Structure Movie.xls from CANVAS
Slides
BKM 328-348
Download Duration Calculation.xls from CANVAS
Slides
BKM 547-565
Slides
BKM 475-497, BKM 509-529
Download Implied Volatility.xls and Black Scholes Demo.xls from
CANVAS
TBA
Slides
BKM 86-96, 111-115, 581-591, 594-600
Slides
BKM 226-251
8. TEACHING MATERIALS (e.g. journals, textbooks, website addresses etc.)
Required Materials:
Bodie, A. Kane and A.J. Marcus (BKM), Essentials of Investments, 12th Edition, Mc-Graw Hill Education.
9781265450090
ISBN:
McGraw-Hill also offers a website you might find useful: https://www.mheducation.com/highered/contact.html
Other required course materials will be posted on the course website in CANVAS as they become available.
Suggested /supplementary Materials:
I suggest you consult one or several of the following texts to acquaint yourself with Hong Kong financial markets. I have put
copies of each of these books on reserve at the library.
1) L.C.K. Low, 2000, Financial Markets in Hong Kong, Springer. ISBN 981-4021-73-3. (An overview of the institutional
and regulatory environment.)
2) Richard Yau, 2004, Securities Investment Practice in Hong Kong, The Hong Kong Institute of Bankers (HKIB). ISBN
962-7322-50-4. (Detailed description of primitive and derivative securities markets in Hong Kong, for HKIB certificate
candidates.)
3) L.S.F. Young and R.C.P. Chiang (eds), 1997, The Hong Kong Securities Industry, The Stock Exchange of Hong Kong Ltd.
ISBN 962-7946-02-8. (An in-depth look at HK equity and debt markets.)
4) Simon S.M. Ho, Robert Haney Scott, and Kie Ann Wong (eds), 2004, The Hong Kong Financial System: A New Age,
Oxford University Press. ISBN 019-5937-49-X. (An updated reference on HK equity and debt markets.)
You may wish to refer to the following internet links to learn more about HK’s financial institutions:
The Hong Kong Monetary Authority (Exchange Fund and Bank Regulation): http://www.info.gov.hk/hkma
The Hong Kong Exchange (Primitive and Derivative securities markets): http://www.hkex.com.hk
HSBC (Multinational HK bank): http://www.hsbc.com.hk
and its HK associate, Hang Seng Bank (62% owned by HSBC): http://www.hangseng.com
The Bank of China (largest bank in the world): http://www.bochk.com
There are also some very good web sites covering finance, investments and financial markets. Here are some of the best:
http://finance.yahoo.com Good source for historical financial data.
http://www.ft.com Site of the Financial Times. Good for news and weekly surveys on investments, banking, finance, etc.
http://www.ftmarketwatch.com Web site from the Financial Times; more focused on finance and investments
The Wall Street Journal Site of Journal to keep abreast of daily events
http://www.afajof.org Journal of Finance home page
http://nber.org National Bureau of Economic Research. Links to many useful economics web sites along with useful historical
statistics
http://www.finweb.com This site has a comprehensive set of links to many useful sites in finance
http://www.jpmorgan.com This site is the J. P. Morgan site. Nearly all major investment banks and financial firms have useful
web sites
http://www.nyse.com Web site of the New York Stock Exchange
9. MEANS/PROCESSES FOR STUDENT FEEDBACK ON COURSE
Complete online Student Feedback Questionnaires (SFQ) Survey during two weeks before the course end at:
Canvas website (https://canvas.ust.hk) or
SFQ Mobile website (http://sfq.ust.hk/mobile/) or
HKUST iLearn app at smartphones / tablets
10. COURSE POLICY (e.g. plagiarism, academic honesty, attendance, etc.)
Attendance: Though 100% attendance is not required (minimum 75% is required), absences will cost you because you will
miss the class exercises that prep you for the exam.
Professionalism: Late arrivals, early departures, chatter, ring tones, unwarranted laptop or smart phone usage, eating,
chewing, or drinking are rude and disruptive to the quality of the learning environment in the classroom. Any such behavior
will be noted and count against you if you are on the cusp between two possible grades.
Make-Ups: Except for students who have time conflicts with other exams, there will be no make-up exams offered. (If you
have time conflicts with other exams, please let Ms. Zhang or me know a month before the exam.) Should you miss the
midterm, your final exam will be re-weighted accordingly, i.e., it will be worth 80% of your final grade. Note that you must
still explain your absence, otherwise you will receive zero marks for your exam. Absence from the exam will not be excused
except under circumstances described in the University Regulations. These cases must be substantiated by the appropriate
documentation within one week of the missed exam.
Academic integrity: Academic integrity and honesty are critical values in upholding HKUST's reputation as a community of
scholars and its claim to the "intellectual property" created by staff and students. As a student of HKUST, you must commit
to the Academic Honor Code. Cheating will not be tolerated. If you are caught cheating during the exams, at a minimum you
will receive zero credit and will face further disciplinary action.
Calculator: Student must bring a calculator to class every time. Financial calculator is optional. Although financial calculator
can sometime help you solve some questions faster, you will still be able to solve the questions in the exams without a
financial calculator. Calculators with text display functions (those that allow you to type A to Z) are not allowed during the
quiz and examinations. All HKEAA approved calculators are allowed during e xaminations.
Course website: https://canvas.ust.hk/courses/48722
You should visit the website regularly because a lot of important information will be available on the course website
including Announcements, Syllabus, Lecture Notes and Grades. Please download the slides before each class and bring it to
class.
11. ADDITIONAL COURSE INFORMATION (e.g. e-learning platforms & materials, penalty for late assignments, etc.)
Class Exercises: There will be one class exercise per class. They will be in real time, i.e. they will test understanding of a
concept covered minutes before. Please bring a calculator to every class. Class exercises will not be graded.
Projects: There are four homework assignments, which are to be done on a team basis. Teams of four to six are allowed.
Please form teams yourselves by February middle. If you cannot form your own team, the TA will help you.
If you feel that some team members do not contribute their fair share to the homework, you can omit his/her name on the
write-up, or you can talk to Ms. Zhang or me. We will treat any complaints confidentially. Your team will stay together until
the end of the term. Each team needs to submit only one write-up (either hardcopy or softcopy) of each homework
assignment, and all team members receive the same homework grade for their work.
Homework assignments should be submitted via softcopy (via Canvas). Only those students whose names appear on the
assignment will receive credit.
Homework assignments will be available on the course website once I have prepared them. You will have one to two weeks
to complete the assignment. Completed assignments are to be uploaded to Canvas <Assignments> before noon on the due
dates to receive full credit. Any late assignment will earn zero credit – no exceptions.
You will have the opportunity to ask questions and discuss any problems with Ms. Zhang after requesting an appointment.
Examinations: There will be two comprehensive exams: a midterm and a cumulative final. These will normally consist of
multiple-choice and/or short questions. The exams are closed-book. An A4 sheet of paper with formulas and other notes
that have been prepared by you will be allowed. The exam will cover all assigned textbook and supplementary readings,
problems and exercises, handouts, and anything mentioned in class.
Appendix
BBA FINA Program Learning Outcomes
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Graduates will be critical and creative thinkers who make effective decisions supported by analytical and
quantitative techniques.
Graduates will be effective communicators in oral and written English for general business applications.
Graduates will have broad understanding of the core business functions and integrate these functions to solve
business problems.
Graduates will have in-depth grasp of their area of business concentration or major.
Graduates will be effective team members and leaders.
Graduates will be effective in multi-cultural and international settings.
Graduates will be effective users of information technology and sources of information in business
applications.
Graduates will understand their professional and ethical responsibility.