Indian School of Business
Smart Money Management
Academic Year: 2023 – 24
Term: 5
Instructor: Prachi Deuskar
Affiliation: ISB
Email:
Prachi_Deuskar@isb.edu
Office Hours: By appointment
Course Objective and Key Takeaways from the Course
Are you thinking about investing your own savings to achieve your financial goals? Working as an
investor advisor? Managing portfolio of a mutual fund or being a hedge fund manager? In this course,
you will learn how to choose the best possible financial portfolio whether you are managing money
for yourself or on behalf of somebody else. In particular, you will learn about
 Asset allocation

Creating an optimal buy-and-hold portfolio (passive strategy)

Factor investing (active beta) and market timing (tactical asset allocation)

Earning risk-adjusted returns (alpha)

Backtesting your own strategy

ESG investing
Learning Goals
The course will focus on two primary goals--- Critical and Integrative thinking and Interpersonal
Awareness and Working in Teams. In meeting these goals, we will use various pedagogies—
lectures, in-class discussions, projects, and cases.
Teaching Pattern

All course material like course pack, readings, pre-readings will be uploaded on LMS for
students to go through as per the requirements of a session as defined in the outline or
announced in class or on LMS.
Textbooks and Readings

The recommended textbook for the course is “Investments”, by Bodie, Kane and Marcus, 9th
ed., McGraw Hill – BKM - (or its Indian counterpart by Bodie, Kane, Marcus and Mohanty,
10th ed. - BKMM). The ISB LRC has quite a few copies of these books for those interested
in referring to it. Some practice problems (ungraded) are from the textbook.
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Pre-requisite Course(s)
No prerequisites other than the core courses.
Online Course Management
We will use the course management system LMS as a course aid. You should refer to LMS for
announcements, course information and supplementary course material. The Academic
Associates will be able to help you with any problems in accessing the LMS.
Honour Code
Students are expected to strictly adhere to the ISB honour code during the conduct of this course.
In particular, the instructor expects that all submissions with your name on them are your own.
Any violations of the honour code will be referred to the Honour Code Committee.
Evaluation Components




The final grade in this course will be determined by the following components.
2 Case write-ups (Group):
20% of grade
1 Project (Group):
20% of grade
In-class assignments (Individual):
20% of grade
Final exam (Individual):
40% of grade
No late submissions of projects/cases will not be accepted.
The final exam will be comprehensive, i.e., based on all the material.
For the final, make-up exam will not be given unless the circumstances are truly extenuating.
The decision will be based on the ASA policy on a case-by-case basis.
In-class assignments (Coding Scheme Reference 4N)


In-class assignments will be done using LMS. You should bring laptop or smart phone, or
tablet or other technology needed to access the LMS.
You have to be present in class for answering the in-class assignment questions.
Assignment Schedule (Tentative)
Name of the
Component
Date of
Submission
/ Deadline
Takehome
or inclass
Group
Assign
ment
(Y/N)
2
Hard copy
/ Soft
copy
Instructions to
students on
word limit /
format of
submission etc
Coding
Scheme
Reference
Project
(20%)
Nov 10, 1230 pm
Takehome
Y
Soft
Instructions
will be
uploaded on
LMS
2N-b
Case 1
(10%)
Oct 27, 12-30
pm
Takehome
Y
Soft
See Case WriteUp Guidelines
3N-a
Case 2
(10%)
Nov 3, 1230 pm
Takehome
Y
Soft
See Case WriteUp Guidelines
3N-a
In-class
Assignments
(20%)
Ongoing
As
mentioned
in the
outline
N
Final Exam
(40%)
As per ASA
Schedule
In-class
N
As mentioned
As
in
the outline
mentioned in
the outline
Hard Copy
Instructions
will be
provided
4N
4N
Group Information
Group Size
Group Composition
Can groups be formed across different sections?
4-5
NA
No
Any other instructions?
NA
Case write up guidelines
See instructions posted for each case on LMS.
Grading
 All group members will receive the same grade for a case
 All group members must individually be prepared to discuss the case in class.
Discussions of Cases
You are not allowed to discuss cases with students outside your group until all sections have
turned in their case assignments. Any violation will be treated as a violation of the ISB Honour
Code.
Attendance & Punctuality (ISB Attendance Policy)
Learning is an interactive process. ISB students are admitted partly based on the experiences
they bring to the learning community and what they can add to class discussions. Therefore,
attendance is an important aspect of studying here. Absence is only appropriate in cases of
extreme personal illness or injury leading to hospitalization, family bereavement.
Please note, voluntary activities such as job interviews, business school competitions, travel
plans, joyous family occasions, etc., are not valid reasons for missing a class.
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You are required to attend the entire 2-hour class as per the schedule. Late arrival and early
departure are disruptive to the learning environment; you should be present in class before the
scheduled start time and stay till the conclusion of class.
Requests for excuse of attendance, if any, should be forwarded to the Office of Academic
Services (ASA) at ASAAssist_Hyd@isb.edu (for Hyderabad) and ASAAssist_Mohali@isb.edu
(for Mohali) for approval. ASA team will verify the same and in turn keep the Faculty and
Academic Associate/s informed of the same.
The ISB expects students to attend all class sessions in every course section. Attendance will be
marked and recorded on LMS. However, if due to completely unavoidable reasons a student is
forced to miss a session, the School policy is below:




If a student misses 20% of sessions in a course; there will be no grade penalty.
If a student misses 30% of sessions in a course, s/he will obtain a letter grade lower than
that awarded by the faculty for that course.
If a student misses 40% of sessions in a course, the student will receive a letter grade that
is two levels lower.
If a student misses more than 40% of sessions in a course, the student will receive an ‘F’
grade for that course.
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Coding scheme for ALL course work
References/Codin
g Scheme
4N
3N- a
3N-b
2N-a
2N-b
2N-c
1N
0N
As a general rule:






[1]
[2]
What kinds of collaborative activities are
What material can be referred
allowed?
to?[1]
Can I discuss
Can I discuss
Can I refer to Can I refer to the
general concepts
case-study
specific issues
external
[2]
solutions or
and ideas relevant
associated with the material?
problem set
to the assignment
assignment with
solutions?
with others?
others?
N
N
N
N
Y
N
N
N
N
N
Y
N
Y
Y
N
N
Y
N
Y
N
N
N
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Students are responsible for submitting original work that reflects their own effort and
interpretation. Remember that any submission should be your own work and should not be
copied in part or verbatim from any other source whether external or internal.
An honour code violation is an honour code violation. A violation under coding scheme 0N is
not less severe than others. A 0N coding scheme submission is judged against a 0N coding
scheme, and a 4N coding scheme submission is judged against a 4N coding scheme; therefore,
any honour code violation is equally severe irrespective of the coding scheme of the
submission.
Students can discuss cases and assignments with the course instructor and the Academic
Associate for the course.
Required and recommended textbooks for the course and the course pack can be used to
answer any individual or group assignment.
Although not all submissions may be subject to academic plagiarism checker (e.g. turn-it-in),
in retrospect, if the Honour Code Committee feels the need, any of the previous submissions of
an individual or a group can be subjected to turn-it-in or any other academic plagiarism
checker technology.
When in doubt, the student should contact the instructor for clarifications.
Any referencing needs to be accompanied with appropriate citations
A non-exhaustive list includes journal articles, news items, databases, industry reports, open courseware
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Session-Wise Topics/Readings
Session
Topic
Date
Before
Session 1
Session 1
Pre-read
 Stats recap, Risk-return estimation
Portfolio Choice-1
 Portfolio Construction
 Diversification
Portfolio Choice-3
 Optimal Portfolio Construction
 Effect of Constraints
Before Session
1
Oct 10
BKMM
Chapters
5,
7.1, 7.2
Oct 13
BKMM
Chapters 7.4,
6.2-6.4
Portfolio Choice-5
 Expected Utility and Risk Aversion
 Estimating Risk Aversion
Portfolio Choice-5
 Human Capital and Risk Capacity
 Portfolio Customization
Oct 17
Session 2
Session 3
Session 4
Session 5
Session 6
Session 7
Oct 19
Asset Pricing Models-1
Oct 24
 The Capital Asset Pricing Model
(CAPM)
 Case 1: Discussion. Dimensional
Fund Advisors, 2002
 CAPM: Evidence, limitations and
extensions
Asset Pricing Models-2
Oct 26
 Multifactor models: betas, alphas,
estimation
 Factor investing
Institutional
Aspects
of
Money Oct 31
Management -1
 Portfolio performance evaluation
 Actual fund performance. Role of fees
and expenses
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References
BKMM
Chapters 6.1,
6.5
Additional
Reading:
Weinberg, Ari,
“The financial
risk you don’t
even
know
you’re
taking”,
bbc.com, 2014
Chapters 9.19.3
BKMM
Chapters 10,
13.2-13.3
BKMM
Chapters 24.1,
11.5
Session
Topic
Session 8
ESG Investing
Nov 2
 Case 2: Discussion. Pushing past the
boundaries of ESG Investing: AQR
Capital Management
Market Timing
BKMM
Chapters 24.1,
11.5
Session 9
Market Efficiency, Behavioral Finance-1 Nov 7
 Law of one price, arbitrage, the
Efficient Market Hypothesis, joint
hypothesis problem
 How to test market efficiency –
forming portfolios, back-testing
strategies, joint hypothesis problem
 Evidence about market efficiency
anomalies and behavioral biases
Project Presentations
Nov 9
BKMM
Chapters 1.5,
11.1-11.2,
11.4, 12
Session 10
Date
References
Additional Reading
Weinberg, Ari, “The financial risk you don’t even know you’re taking”, bbc.com, 2014.
Cases
Case analysis instructions will be provided separately.
1.
Dimensional Fund Advisors, 2002
2.
Pushing past the boundaries of ESG Investing: AQR Capital Management
Project
Detailed project instructions will be provided separately.
Broad goal: Understand the business of one particular robo advisor
Intended Learning Outcomes
Sessions 1-4, Session 10 (Project): The students should be able to form optimal portfolios, understand
how risk-aversion, nature of job, and horizon affect the trade-off between risk and return. They should
understand how automation of these processes is leveraged by robo advisors.
Sessions 5-6: Student should understand of how multiple betas capture systematic risk, how to
estimate factor models, calculate alpha and hedge systematic risk.
Sessions 7-8: Students should understand how active money management can add value by ESG
investing, market timing, and generating alpha. They should be able to calculate various measures
of performance evaluation and also learn about the evidence about mutual fund performance.
Sessions 9: Students should understand how deviations to market efficiency provide opportunities for
sophisticated investors and the risks and constraints in exploiting those opportunities.
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