Syllabus, FINA 3080 AB, Fall 2023, Prof. Chao YING
DEPARTMENT OF FINANCE
THE CHINESE UNIVERSITY OF HONG KONG
FINA 3080 AB: Investment Analysis and Portfolio Management
Fall 2023
Time and Location:
Session A: Tuesday
Session B: Tuesday
2:30 - 5:15pm, Mong Man Wai Bldg LT1
9:30 - 12:15pm, Cheng Yu Tung Bldg 209B
Instructor: Prof. Chao Ying;
Office: 1232, Cheng Yu Tung Building (CYT)
Email: chaoying@cuhk.edu.hk
Office Hours: By appointment
TA: Ms. Lillian Li; Finance PhD Student (CUHK)
Office: 735, Cheng Yu Tung Building (CYT)
Email: shutingli@link.cuhk.edu.hk
Office Hours: Thursday 2:00 - 4:00pm
If office hours conflict with your other courses, please send me your name, SID, and your
class schedule to me before the end of the 3rd week. After I double check it in the system, we
can arrange special office hours for you if needed. If you send your schedule after the 3rd
week or have other conflicts, we can not arrange any additional office hours for you.
In addition, this class is in-person only. We can not provide any recordings or Zoom
meetings. You take all the responsibility by yourself if you can not attend the class or exams
in person.
Pre-request (MUST READ)
This class is math-heavy and very quantitative. In addition to the pre-request in the system, you
should also have taken other basic math and statistics courses. For example, to understand my
class, you must already know the following concepts very well:
(1). how to calculate variance, covariance, and correlation and their properties;
(2). the present value and future value of cash flows, which include annuity and perpetuity
(3). the first order derivatives and find the minimum or maximum of a function,
(4). the properties of exponential functions and normal distributions.
(5). CAPM
In addition, you must have a financial calculator that is approved by CUHK and know how to
use it. Please make sure you know these concepts before taking this class. I will assume you
know these concepts very well during the whole semester.
During the first day of our lectures, I will give a quiz to test these basic concepts. Though it is
not graded, please show up on time since I do not give any extra time. Please refer to the 3rd
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Syllabus, FINA 3080 AB, Fall 2023, Prof. Chao YING
page if you can not attend it on time. You take all the responsibility by yourself if you are late
or miss the quiz without telling me in advance.
Course Description
Finance 3080, designed as a course in investment analysis, is intended for students who want
to become investment professionals, knowledgeable individual investors, or both. The course
covers the primary financial securities: bonds and stocks, and methods for combining these
underlying assets into a portfolio. Generally, three parts would be discussed in this course.
First, the overall layout of financial markets and the available financial instruments and their
trading in real markets would be introduced. Then we will study fixed income securities
(bonds). Because bonds pay a fixed amount of interest on a set schedule to investors, the
valuation and pricing of bonds is primarily an application of the time value of money concept.
This concept should be familiar to students satisfying the central prerequisite to this course.
The midterm (7 pm – 8:30 pm, October 19 at the LSK LT7) will cover both the general
overview material and the bond material, with a heavy emphasis on bond pricing and bond risk
measures.
Following our work on fixed income securities, we will study equity securities (stocks). Since
stocks represent a residual ownership stake in a company, the cash flows to stockholders are
generally more volatile than the cash flows to bondholders. The course will cover various
valuation methods for stocks, focusing on dividend growth models. Next, we will study
portfolio theory, which tells us how to measure investment risk and how risk can be mitigated
by combining financial assets into a portfolio.
The final exam will be cumulative, testing students’ knowledge on all of the material covered
in the course.
Course Requirements and Grading
Grades will be based on the student’s performance on one midterm, one final exam, three
problem sets, and class participation. Exams will be comprised of multiple choices and short
answer questions. All tests are closed book and I will provide the formula sheet. Your overall
score in the course will be determined mechanically as the weighted average of the four
component scores. The weights on each component of the overall course grade are as follows:
Quiz
First day of lectures
0%
Midterm
October 19
40%
Final Exam
Dates To Be Announced
50%
Two Problem sets
Due Dates To Be Announced
10%
Make-up exams are generally not possible. There will certainly not be make-up versions of the
midterm. If you have to miss the midterm for a pre-approved reason, then the percentage of
the midterm will be added to your final. In other words, if you miss the midterm for a pre-
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Syllabus, FINA 3080 AB, Fall 2023, Prof. Chao YING
approved reason, your final exam will count 90% (50% + 40%). Please show up on time since
I do not give any extra time.
What is a valid pre-approved reason for missing a test?
Any conflict must be documented in writing (or you forward the related emails) and submitted
to me for my approval. The request must include the student’s name and the conflict. Check
your schedules now!
If you fail to show up for either test without telling me beforehand, then you must present a
doctor’s note stating the details of your illness and you were too sick to take the test. The
doctor’s note without details will not be approved. Other personal reasons may be considered
valid at my discretion. If you miss either test without a valid reason, then you will receive
a zero on the missed test. I strictly follow the rules so please attend the exams on time.
If your email does not contain the required attachment, I will not reply and you get a zero
if you do not show up during the exam. I do not accept any documents after the exams.
You take all the responsibility by yourself if you do not send me the related documents
before the exams.
Homework
The purpose of two problem sets is to help you better understand the materials lectured and
prepare for exams. The homework questions are usually more difficult than the exam questions
and you should start working on them as early as possible. You can work on your own or work
as group (up to three people). All group members will receive the same score. Although
students may help each other with the problem sets, each individual should make sure that they
can solve all problem set questions. The solutions will ONLY be available during office hours.
We do not accept any late submissions and/or any revisions. There is no credit for late problem
sets. I will post the problem sets on the Blackboard website.
Course Materials
The required textbook for the course is:
Essentials of Investments, Bodie, Kane, and Marcus, 12th Global edition, McGraw-Hill.
Other suggested book:
Investments, Bodie, Kane, and Marcus, recent edition, McGraw-Hill.
All required readings should be completed prior to the class meeting for which they are
assigned. The course website, available through Blackboard, will serve as the official
mechanism for distributing course materials.
http://blackboard.cuhk.edu.hk/
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Syllabus, FINA 3080 AB, Fall 2023, Prof. Chao YING
Finally, students will need a calculator for exams. Calculators approved by the Registration and
Examinations Section of the University are allowed. Programmable calculators must be cleared
before each test, and there is no sharing of calculators during the test.
General and Miscellaneous Policies
● During lectures, you should always be prepared to answer questions. I will address
questions to individuals and to the class as a whole at my discretion. These questions
will assume that you have completed the assigned readings prior to the class session.
● Although attendance will not be taken, you are responsible for everything covered or
assigned in class. The lectures will sometimes depart significantly from the reading
material assigned.
● The use of laptop computers is permitted during lectures solely for the purposes of
taking notes and obtaining course materials. E-mail and the Internet may not be
accessed during lectures except to visit the course websites listed in the syllabus.
● Academic dishonesty will not be tolerated. Your responsibilities with regard to
scholastic dishonesty are described in detail in the Policy Statement on Scholastic
Dishonesty. In particular, it is expected that the work on your examinations will be
entirely your own. Failure to do so may result in failure on the examination or course.
● Examinations will not be returned. To appeal grading on final exam, a written explanation
with details (can be sent by email) is required. Any appeal should be sent within two
weeks after the grade becomes available to you.
Study Guide
My teaching will be mainly based on my lecture notes, which will be posted on the Blackboard
before each class. You need to preview it before coming to class. In each class, I will explain
the concepts and solve some example problems. You are responsible for everything I teach in
class. Moreover, you need to read the assigned readings carefully. The textbook is a very useful
resource, and I suggest you read every chapter at least twice. I also expect your active
participation in class discussions. If you want to do well, come prepared, speak up when you
have questions, and apply your best efforts.
I suggest that you read each chapter once before it is discussed in class and then read it again
after the topic is covered in class. Reading the material beforehand will greatly assist in having
meaningful class discussions. If you are having trouble with a concept or problem, go to office
hours as soon as possible.
Grade Descriptors
A
AB
Outstanding performance on all learning outcomes.
Generally outstanding performance on all (or almost all) learning outcomes.
Substantial performance on all learning outcomes, OR high performance on some
learning outcomes which compensates for less satisfactory performance on others,
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Syllabus, FINA 3080 AB, Fall 2023, Prof. Chao YING
C
D
F
resulting in overall substantial performance.
Satisfactory performance on the majority of learning outcomes, possibly with a few
weaknesses.
Barely satisfactory performance on a number of learning outcomes.
Unsatisfactory performance on a number of learning outcomes, OR failure to meet
specified assessment requirements.
Academic honesty
The Chinese University of Hong Kong places very high importance on honesty in academic
work submitted by students, and adopts a policy of zero tolerance on cheating and plagiarism.
Any related offence will lead to disciplinary action including termination of studies at the
University. Attention is drawn to University policy and regulations on honesty in academic
work, and to the disciplinary guidelines and procedures applicable to breaches of such policy
and regulations. Details can be found at
http://www.cuhk.edu.hk/policy/academichonesty/.
Late drop
In view of the increasing numbers of late-drop applications for undergraduate courses these
two years, the Department, in consultation of the Department Committee on UG Studies, has
discussed the issue with the Department ExCo. The Department ExCo, at the meeting held on
July 13, 2023, has approved the following guidelines about the late-drop policy for
undergraduate courses:
• As a general principle, late drop will normally not be considered except for unforeseen
reasons.
• Proof of strong evidence is needed for late drop, especially after the middle of the
academic term (Nov/Dec for the Fall term and March/Apr for the Spring term). For
example, a medical certificate will be needed for health-related reasons.
• Late drop is unlikely to be approved in the last month of the academic term, except for
extenuating circumstances.
• When submitting late drop applications, students should indicate whether their late drop
applications involve other courses as well. Late drop for multiple courses merits
stronger considerations for approval.
• Please attend the exams and hand in the homework before your late drop is approved
by the school. Otherwise, you will get zero point.
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Syllabus, FINA 3080 AB, Fall 2023, Prof. Chao YING
Updated Schedule
A sample class schedule is shown below. This schedule may be modified somewhat as the semester
progresses as some topics take more or less time than anticipated. The availability of new material and
practice questions may be announced in class, but check Blackboard for new material. The student is
responsible for checking Blackboard for new materials.
MTG
Week of
1
5-Sep
INTRODUCTION and OVERVIEW - Schedule, Grading,
Problem Sets, Class Policies
2
12-Sep
OVERVIEW - Financial Instruments
3
4
19-Sep
26-Sep
TOPIC
CHAPTER
1.1-6
2.1-4, 10.1
MECHANICS: How Securities Are Traded
3.1-7
BONDS - Yield and Pricing Calculations
10.2-4
BONDS - Yield Curve and Default Risk
10.5-6
BONDS - Interest Rate Risk: Duration
11.1
BONDS - Interest Rate Risk: Immunization
11.2
5
3-Oct
STOCKS - Definitions and Valuation Models
13.1-2
6
10-Oct
STOCKS - Valuation Models (DDM)
13.3-4
REVIEW for Midterm
7
19-Oct (Thu)
8
24-Oct
Midterm: BONDS + Overview material
Time and Location: 7 pm – 8:30 pm at the LSK LT7
Go through the midterm
RISK AND RETURN - Expected Return and Variance; E(Rp),
Asset Allocation
9
10
11
31-Oct
7-Nov
14-Nov
DIVERSIFICATION - Portfolio E(R) and Variance;
Allocations Under Uncertainty
6.1-2
DIVERSFICATION – Optimal Risky Portfolios
6.3-4
CAPM - Theory and Evidence
7.1-3
APT - Theory and Evidence
7.4-5
EMH - Efficient Markets Hypothesis:
8.1-3
BEHAVORIAL FINANCE – Biases and Limits-to-arbitrage
12
21-Nov
5.1-2,5
9.1
OPTIONS – Instruments, Definitions, and Payoffs
20.1-2
OPTIONS – Valuation
21.2-3
COURSE WRAP-UP, Review for Final Exam
13
28-Nov
FINAL EXAM: Date, Time, and Room Will Be Announced
6
All Above