PENNSYLVANIA STATE UNIVERSITY
Smeal College of Business Administration
Course Number:
Course Title:
Instructor:
Office:
Phone:
E-mail:
FIN 406
Security Analysis and Portfolio Management
Ruchira Sharma
Room 609N in Business Administration Building
863-3564
rxs71@psu.edu
Objective
The objective of the course is to introduce the participants to security analysis and
portfolio management. We will start by discussing the major players, security types and
trading mechanisms in financial markets. We will define and discuss ways of measuring
risk and return for individual assets and portfolios. This will include the discussion of
important concepts of diversification and efficient markets. We will then move on to a
more analysis of fixed income securities, equities and options. We will end the course
with a discussion of portfolio performance evaluation techniques.
Meetings
Section FIN406.1
Tuesdays and Thursdays
1:00-2:15
205S Hend-S
Section FIN 406.5
Tuesdays and Thursdays
9:45-11:00
105 Wartick
Section FIN406.6
Tuesdays and Thursdays
11:15-12:30 105 Wartick
As the sections are full or nearly full, please attend the section you are registered for.
I will be available for consultation in my office at the following times:
Tuesdays
8:00 – 9:30 am
Wednesdays 9:30 – 11:00 am
If you wish to see me outside these times, please schedule an appointment with me.
Prerequisites
You are required to have taken FIN305W to take this course.
Textbooks and Readings
Required:
Bodie, Z., A. Kane and A.J. Marcus, Essentials of Investments, Fourth Ed.,
McGraw-Hill Irwin
Recommended:
Elton, E.J. and M.J.Gruber, Modern Portfolio Theory and Investment Analysis,
Fifth ed, Wiley
Additional readings will be handed out or recommended as the term progresses.
Assessment
The course grade will be determined by your performance in a project (group work), two
quizzes and a final examination. The weights for the various components are:
Quiz 1
Quiz 2
Project
Final Exam
20%
20%
20%
40%
Participation in the quizzes is voluntary. If you do not take one or both quizzes, the
weights assigned to them will be allocated to the final exam. [Concepts like risk-aversion
and diversification will be useful in your decision-making!]. The quizzes will consist of
multiple-choice questions. I will announce the dates and times of the quizzes in the next
few days.
The project will involve writing a report based on a case that will be given to you. You
can work in groups of 4-5 members. The details of the requirements, the case, and due
dates will be handed out in due course.
I will also assign problems from the book and additional questions as homework.
Homework will NOT be collected or graded. I will provide the solutions to the problems
and will discuss them in class. I strongly recommend that you spend time doing the
problems before they are discussed in class as a way to test your understanding of the
material.
Tentative Schedule
Week 1
Introduction
Investment Background and Issues
Financial Markets and Instruments
Week 2
Investment Process
Investment Returns: Historical record
Week 3
Measurement of investment returns
Risk and Risk Aversion
Week 4
The capital allocation line
Portfolio returns and risk
Diversification
Week 5
Portfolio returns and risk (continued)
Week 6
The efficient frontier
Security market line
Week 7
Capital Asset Pricing Model
Week 8
The efficient markets hypothesis
Week 9
Fixed Income Securities
Bond prices and Yields
Duration and Convexity
Week 10
Managing fixed income investments
Week 11
Security Analysis and Equity Valuation
Week 12
Financial statement analysis
Technical analysis
Week 13
Introduction to derivative assets
Option valuation
Week 14
Portfolio performance evaluation
Week 15
International Diversification (time permitting!)