F INANCE 397.1
I NVESTMENT MANAGEMENT
(U NIQUE #03575)
S PRING 2015
Professor
Class
Class Hours
Office
Office Hours
Phone
E-Mail
Course Web Page
Teaching Assistant
John T. Ritter
GSB 3.104
Monday and Wednesday 2:00-3:15
6.210 GSB – Walkway outside finance department by escalators
Monday and Wednesday 3:30 – 5:00 or by appointment
512-799-7749 (c) john.ritter@mccombs.utexas.edu via Canvas
I prefer that you see me with questions
Course Objectives
This course is designed to be a survey of the field of investments. The course will focus on the application of financial theory to the issues and problems of investment management. In particular, you should leave this class understanding the components used to put together a portfolio. This requires you to understand many different types of investable assets (bonds, stocks, mutual funds, and derivatives), how they are combined to form a portfolio, and how they are each affected by the overall economy. In addition, there is background and fundamental information which is necessary to understand. This information includes topics such as types of markets, how to place orders, behavioral finance and what stock indices represent.
Prerequisites
Finance 397.1 is a Restricted Course for students who are currently enrolled in a graduate program in the College of Business and Administration. Note that several prerequisites apply for this course and are published in the Course Schedule. Prior completion of Business Administration 285T or 385T Financial
Management, and completion or enrollment in Finance 286 Valuation. In addition, proficiency in mathematics, statistics and excel or other spreadsheet platform is presumed. Students who are uncertain as to whether they satisfy these requirements should notify the instructor.
Materials
Textbook: Investment Analysis and Portfolio Management, 10 h
Learning, 2011) – available at the Co-Op.
Edition by F. Reilly and K. Brown (Cengage
Supplementary Readings & Lecture Slides: All supplementary readings listed in the syllabus and lecture slides will be available on-line via Canvas. Lecture Slides will be available following the class.
Lecture Slides are meant as an outline to reduce the amount of rote copying of definitions and formulas but certainly not as a self-contained lecture summary. Reading the lecture slides without attending class will most likely be of little benefit.
Additional Readings: Additional readings regarding current events may be made available as
Handouts or posted on-line via Canvas.

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– Spring 2014 page 2
Project: Stock-Trak: www.stocktrak.com – You will be required to have access to a Stock-Trak account connected to this course. The cost is around $30 for the semester.
Calculator: You will need a business calculator for this class. The calculator should have the following keys: IRR, n, i, PV, PMT, FV, and CF. As long as those keys are present, the calculator is fine. If you may consider taking the CFA exam in the future, I recommend the HP 12c (this calculator is the finance industry standard and one of only two calculators that may be used on the CFA exam). The other calculator which is permissible for the CFA exam is the Texas Instruments BA II Plus. You should bring a financial calculator to every one of our class meetings.
Strongly Recommended: Bloomberg.com, WSJ, Financial Times, The Economist, or some other
Financial News source
Professionalism Policy
The highest professional standards are expected of all members of the McCombs community. The collective class reputation and the value of the program’s experience hinges on this. Faculty are expected to be professional and prepared to deliver value for each and every class session. Students are expected to be professional in all respects. This Includes:
-Being on-time and in your seat when class starts
-Staying until the end of class
-Being constructive to the learning environment
-Being “present” in the class and focused on class material. This includes, but is not limited to no internet, no email, no cell phones, no laptops, no texting, and no talking to your neighbor about last night.
-Coming prepared to contribute to the class
-Communication with the professor
Think about this class as though it were a job, and this is a bi-weekly meeting with a senior executive at your firm. Would you show up late, unprepared, be texting during the meeting? Of course not! Professionalism in class is a good discipline to prepare you for the senior positions you are destined for. I will hold you to a very high standard, but I will hold myself (and how this class is presented) to an even higher one.
Grading
Your grade in the course will be determined as follows:
Mid-Term Exam 1 (Weeks 1 through 11)
Final Exam (Comprehensive):
30%
40%
Investments Project 25%
Class Participation 10%
Letter grades for the course will be based on the student’s ranking in the course relative to other students (i.e., the curve) as shown to the left. In general, there will be about 30% A’s, 40-50% B’s, 20-30% C’s or below. Plus/minus grades will be assigned for the final grade (there is no A+ though). With that said, grades are typically curved up substantially at the end of the semester. Curves are done for the class as a whole, not for individuals. In other words, someone with a final course grade of 88 will not get a higher grade than someone with a course grade of 89 as long as that person is eligible for the curve.

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– Spring 2014 page 3
Appeals: There are no verbal appeals of grade changes. You should submit a written statement explaining the problem within one week of receiving your grade and we will be happy to re-grade any exam or assignment. The entire exam or project will be re-graded and the score may increase, remain the same, or even decrease.
Late Assignments: Assignments turned in after the start of Class will lose 25% of the grade. After 1 day, an assignment will not be accepted.
Bad Questions: Unfortunately, there are poorly written questions that find their way into exams from time to time. If more than 4/5 of the class misses a question, it will automatically be deemed a ‘bad question’ and removed from consideration.
Fairness to Students: I strive to treat students with dignity and fairness. This does not mean that I will agree with your ideas or opinions. If you feel that I have been unfair in any way, please let me know. It takes courage to do so.
Make-Up Work: There are no do-overs in the business world. Likewise, there are no make-ups or extracredit given in this class.
Class Preparation
It is particularly important to me that you prepare for class, arrive on time, stay for the entire class, keep your laptops and other non-necessary electronics closed and most of all respect your peers. Being prepared for class means that you have read the assigned materials. That way, you will have thought about the material already. I WILL collect homework which will be part of the class participation grade. However, I will not grade it. Homework will be handed out at the end of each class and will be due 1 week later. I will post the answers, if applicable, after homework is turned in. I believe that you learn investments by working problems. The assigned problems are there to ensure that you consistently progress in the course and pace yourself. The material builds upon itself. If you fall behind, it will be difficult to catch up at exam time.
Class Participation
Class participation and questions are encouraged! If you have a question, you can be assured that someone else in the class has the same question, so ask. However, participation will not always be voluntary. This is why it is important to come to class prepared. Participation will be 10% of your grade. Class contribution consists of positive and constructive comments, questions, remarks, and answers in class. Effective contribution means participating such that your answer or question moves our analysis and understanding forward.
In addition, as with your future employer, your participation includes participating in the class in an ethical and upstanding manner. Any violations of the honor code or inappropriate attitude in class will be met with ZERO tolerance, removal from the classroom, and potential prosecution under University guidelines.
Attendance Policy and Late Policy
You are expected to attend class and to be on time. Things happen – you oversleep, a bus runs late, you’re sick, etc. I excuse three absences or late appearances. After that, you are ineligible to have your grade curved. When students don’t come to class tend to receive grades of D or F on the exams. When students arrive late, they are generally confused and tend to disrupt other students and the teaching of the class.
Here’s the positive side of my policy: as long as your absences and late arrivals do not add up to more than three (note: that is a total of three, not three of each) and you do not disrupt the class in any other way
(packing up early, leaving early, talking to your neighbors, etc.), you will be eligible to have your grade

Ritter FIN 367
– Spring 2014 page 4 curved. If you are not eligible to have your grade curved, you will be graded solely on the above grading scale. As stated above, the curve in this class is normally significant and something that you want to be eligible to participate in.
If you need to leave the class early for any reason, please let me know before the beginning of the class period and leave quietly so as not to disturb the other members of class. I know many of you will be interviewing and such appointments will not affect your grade in this class.
Students should attend the class section to which they are registered. I only teach 1 section. My class will cover different topics than or topics in a different order than other professors.
Excused Absences: I honor excused absences as determined by the College of Business Administration.
The College makes the determination and you provide the approved excuse to me. Please, do not bring an excused absence to me until you have been approved by the College. If you plan to observe a religious holiday, please let me know at least 2 weeks in advance according to University guidelines, so that appropriate accommodations for you may be made, if required.
Preparing for the Exams
I will teach you the material in class and then you will need to spend time working AFTER class. You will need to review what we did in class and work problems.
. You should read the textbook when you are having difficulty understanding the slides and problems. If you still have questions, please come see me during my office hours as soon as possible.
This class utilizes a lot of non-textbook readings. These readings are used to enhance and expand on the text book readings and provide additional real world application for the discussions. You will not be
tested on anything in the non-textbook readings that is not specifically discussed in class. This means you do not need to memorize all of the facts and ideas in these readings. However, you do need to read them in order to be able discuss them in class.
Exams
The Mid-Term exams will be held in class and will cover material covered up to that point in class. The
Final Exam will be comprehensive and will cover material from lectures, class discussions, assigned readings, and guest lectures. Exams will strive to test the comprehension level, not merely memorization skills. Exams tend to include most of the material that I have taught (rather than just a few big questions).
The tests will include both qualitative and quantitative material. The qualitative questions are usually short answer or multiple-choice.
I do not release old exams. I have found that releasing old exams is problematic because (1) it results in people studying “to the exam” rather than studying to learn; and (2) students inevitably feel that old exams are easier than the current exam. In addition, I do not allow students to keep their exams. This maintains the fairness of exams, since you know that no one has seen old exams. You will have ample opportunity to review your exam during the week following the reception of the grade.
Project
25% of your grade will be a portfolio management project. This project is broken down into three parts.
1) Investment Policy Statement and Asset Allocation (5pts)
2) Stock Pitch (10pts)
3) Portfolio overview (10pts)
A detailed scenario and list of deliverables will be provided separately.

Ritter
Tentative Class Schedule
FIN 367
– Spring 2014 page 5
All readings correspond to “Investment Analysis & Portfolio Management” 10 th Edition by Reilly and
Brown (Cengage South-Western, 2012). Readings are to be read ahead of class. All classes will be held in
GSB 3.104 on Tuesdays & Thursdays from 2:00 to 3:15. The following Schedule is Subject to Change.
Check Canvas for any updates and the latest version.
Reilly Brown Text Book Additional Readings Course Section
I. Introduction to Investing
1. Introduction to Investing
2. Introduction to Markets
3. Investment Planning
4. Introduction to Risk & Return
2. Portfolio Management
1. Utility & Indifference Curves
2. Two Asset Portfolios
Chapter 1 Sections 1.1 & 1.3
Chapter 3 Sections 3.2 & 3.3
Chapter 2 Appendix
Chapter 4 Sections 4.1 - 4.4
Chapter 2 All
Chapter 1 Section 1.2, Appendix
None
Chapter 3 Appendix
Chapter 7 All
Embracing Complexity
Guide to the Markets - 1Q 2015
Does Asset Allocation explain…
WPKTN - Utility
Rise of Cross Asset Correlations
3. Indexing & Capital Market Theory Chapter 8 Section 8.1
4. Asset Pricing Models Chapter 8 Sections 8.2-8.5
Chapter 9 All
3. Intoriduction to Investment Analysis
1. Macro Economic Environment Chapter 12 Sections 12.1-12.2
Chapter 13 Sections 13.1-13.5
Chapter 10 All 2. Financial Statement Analysis
4. Fixed Income
1. Introduction to Fixed Income
2. Bond Pricing & Yields
Chapter 17 All
Chapter 18 Sections 18.1-18.4
3. Term Structure of Interest Rates Chapter 18 Sections 18.5 -18.8
4. Managing Bond Portfolios Chapter 19 All
When Alpha Becomes Beta
Engineering Targeted Risks & Returns
Video: How the economy works
WPKTN - Convexity & Duration
Hero Indenture
5. Equity
1. Introduction to Equity None
2. Introduction to Security Valuation Chapter 11 All
3. Growth Models
6. Efficient Markets & Behavioral Finance
Chapter 14 Sections 14.1-14.9
1. Efficient Market Hypotheses
2. Technical Analysis
3. Behavioral Finance
7. Trading & Execution
8. Derivatives
1. Forwards & Futures
Chapter 6 All
Chapter 15 All
None
Chapter 4 Section 4.5
2. Options
What's it Worth
Demographics of Overconfidence
Chapter 20 Sections 20.1.1-20.1.2, 20.2.1-20.2.2,
Chapter 21 All
Chapter 20 Remainder of 20.1 and 20.2
Chapter 22 All
Chapter 20 Sections 20.3-4 3. Put, Call Forward Parity
9. Active Management
1. Performance Measurement
2. Indexes
3. Investment Companies
4. Alternatives
10. Ethics
Chapter 25 All
Chapter 5 All
Chapter 24 All
Understanding Expected Returns
AMZ Facts & Method
The Winners Game
Hedgefund Mirage
The right answer to the wrong question
CFA Code of Ethics
The Ethical Mind

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THIS OUTLINE SHOULD BE CONSIDERED REPRESENTATIVE OF THE MATERIAL WE WILL
COVER DURING THE SEMESTER; IT IS SUBJECT TO CHANGE UPON PROPER
NOTIFICATION – WHICH INCLUDES POSTING ON CANVAS AND / OR IN CLASS
NOTIFICATION.
KEY DATES
PLEASE NOTE: I DO NOT GIVE MAKE-UP EXAMS (EXCEPT FOR DOCUMENTED
ILLNESS OR UNIVERSITY APPROVED ABSENCES). IF YOU CAN’T MAKE THE EXAMS,
PLEASE DO NOT TAKE THIS CLASS.
I AM FREQUENTLY ASKED ABOUT TAKING THE FINAL EXAM EARLY IN ORDER TO
ACCOMMODATE PLANE TRIPS HOME. I AM SIMPLY UNABLE TO ACCOMMODATE
THESE REQUESTS. I ABIDE BY THE UNIVERSITY EXAM SCHEDULE.
Wednesday, March 11: Mid-Term Exam 1 – IN CLASS
Wednesday, February 25: Class Project Part I
Wednesday, April 1: Class Project Part II
Wednesday, May 6: Class Project Part III
Final Exam – Per University Schedule – Comprehensive

Ritter
Short Bio
FIN 367
– Spring 2014
Lecturer
Department of Finance
• MBA, University of Texas Graduate School of Business, 1994
• JD, University of Texas School of Law, 1994
• BS, University of Texas, 1991
CFA - 2002 page 7

Ritter
Academic Dishonesty
FIN 367
– Spring 2014 page 8
Academic dishonesty will not be tolerated. Any individual suspected of cheating, including stealing or using stolen examinations, will be disciplined to the maximum extent possible. Review UT Honor Code at http://registrar.utexas.edu/catalogs/gi09-10/ch01/index.html
The McCombs School of Business has no tolerance for acts of scholastic dishonesty. The responsibilities of both students and faculty with regard to scholastic dishonesty are described in detail in the Policy Statement on Scholastic Dishonesty for the McCombs School of Business:
By teaching this course, I have agreed to observe all of the faculty responsibilities described in that document. By enrolling in this class, you have agreed to observe all of the student responsibilities described in that document. If the application of that Policy
Statement to this class and its assignments is unclear in any way, it is your responsibility to ask me for clarification. Policy on
Scholastic Dishonesty: Students who violate University rules on scholastic dishonesty are subject to disciplinary penalties, including the possibility of failure in the course an/or dismissal from the University. Since dishonesty harms the individual, all students, and the integrity of the University, policies on scholastic dishonesty will be strictly enforced. You should refer to the
Student Judicial Services website at http://deanofstudents.utexas.edu/sjs/ or the General Information Catalog to access the official University policies and procedures on scholastic dishonesty as well as further elaboration on what constitutes scholastic
dishonesty.
Students with Disabilities
Upon request, the University of Texas at Austin provides appropriate academic accommodations for qualified students with disabilities. Services for Students with Disabilities (SSD) is housed in the Office of the Dean of Students, located on the fourth floor of the Student Services Building. Information on how to register, downloadable forms, including guidelines for documentation, accommodation request letters, and releases of information are available online at http://deanofstudents.utexas.edu/ssd/index.php. Please do not hesitate to contact SSD at (512) 471-6259, 471-6441 TTY or via e-mail if you have any questions.
Religious Holidays
By UT Austin policy, you must notify me of your pending absence at least fourteen days prior to the date of observance of a religious holiday day. If you miss a class, an examination, a work assignment or a project in order to observe a religious holiday day, you will be given an opportunity to complete the missed work within a reasonable time after the absence.