National Cheng-Kung University
College of Management
Department of Accountancy and Graduate institute of Finance
Investments
Ⅰ. Instructor
Prof. Andrew Minglong Wang
Ⅱ. Objectives
This course will provide graduate students with a theoretical and practical
framework for analyzing investment instruments available in the well-developed
security markets. I will try to link theory to practice and attempt to make teaching
materials consistent with that of CFA institute. My teaching will concentrate on
providing the intuition that will guide graduate students as they confront new
ideas and challenges in their professional careers.
(1) The introduction of investment environment, basic tools, and techniques for
financial investment.
(2) The assessment of risk and expected return attributes of the possible investment
vehicles, and the formation of an optimal portfolio of assets.
(3) The derivation of partial equilibrium models and the examination and analysis of
their properties.
(4) An overview of the universe of fixed-income securities, and the examination of
valuation principles, determinants of risk and return, and bond portfolio strategies
commonly used.
(5) The discussion of market efficiency and the analysis of valuation models used to
uncover mispriced securities.
(6) An introduction of derivative securities, examination of their investment
characteristics, and application of derivatives in financial risk management.
(7) The analysis of active portfolio management, portfolio performance evaluation,
and the implication of international diversification.
The focus of this course will be devoted to detailed analysis of investment
instruments currently available in Taiwan and the USA. Students registering in this
course should expect to get involved in full discussion of empirical applications of
investment instruments..
Ⅲ. Required textbook and recommended materials:
1. Investments by Bodie, Kane and Marcus, 8th edition, McGraw-Hill/Irwin Inc.,
2002 (Taiwan edition by Shin Lou Book Co. Ltd ..)
2. Modern Portfolio Theory and Investment Analysis by Elton and Gruber, 5th edition,
John Wiley & Sons, Inc. (recommended but not compulsorily required).
3. Additional articles from various journals will be distributed in class.
Ⅳ. Course outline
PartⅠ Introduction of investment environment and tools
1. Introduction
2. Markets and Instruments
3. Trading Mechanism
4. Mutual Funds
PartⅡ Mean-Variance and Portfolio Theory
1. Risk and Risk Aversion
2. The Dominant Principle and Efficient Frontier
3. Risk diversification and optimal portfolio
4. The capital market line
PartⅢ Equilibrium in Capital Market
1. The capital Asset Pricing Model
2. Index models
3.
4.
PartⅣ
1.
2.
3.
PartⅤ
Arbitrage Pricing Theory
Market Efficiency
Fixed-Income Securities
Bond valuation principle
Duration and Immunization
Term Structure of Interest Rate
Security Analysis
1. Equity Valuation Model
2. Macroeconomic Analysis
PartⅥThe Derivative Securities
1. Call and Put
2. Forward, Futures and SWAP
3. Risk Management
PartⅦ Portfolio Management
1. Portfolio Performance Evaluation
2. Asset Allocation and Portfolio Insurance
3. International Diversification
PartⅧSummary, Review and Discussion
Ⅴ. Activities and Assignments
1.
2.
3.
4.
5.
Read the assigned chapters and recommended materials.
Attend the class, raise questions and participate discussion.
Finish the homework assignment and turn them in on time to teaching assistants.
Show up for the mid-term and final exam.
Finish the assigned projects or class presentation.
Ⅵ. Grading policy
Attendance:
10%
Homework:
Class participation:
Project or presentation:
Mid-term exam:
Final exam:
10%
20%
10%
20%
30%
Ⅶ. Office Hours:
Room 63309, TEL (06) 2757575, ext. 53424
Tuesday :
10:00~12:00 a.m.
Thursday:
1:00~2:00 p.m. or by appointment.
Ⅷ. Agenda
Sessions
1
2
3
4
5
6
7
8
9
Reading assignments and
Homework
activities
assignments
The investment environment
(1) CH.1 and 2
and financial instruments
(2) Discussions of asset classes
Trading mechanism and mutual (1) Ch. 3 and 4
funds
(2) Discussions of security
trading mechanism
Mean, variance, risk aversion (1) Ch. 5 and 6
Homework 1 due
and asset allocation.
(2) Discussions of return, risk
and risk aversion
Optimal risky portfolios and
(1) Ch. 7 and 8,
index models.
(2) Discussions of
Diversification and index
model.
CAPM and APT
(1) Ch. 9 and 10
Homework 2 due
(2) Discussions of equilibrium
model and arbitrage
opportunities
Efficient Market Hypothesis
(1) Ch. 11
Homework 3 due
(2) Discussions of beta
intuition
Behavioral Finance and security (1) Ch. 12 and 13
returns
Bond valuation and term
(1) Ch. 14, 15 and 16
structure of interest rate and
(2) Discussions of bond
duration
mutual funds
Mid-term exam
(1) Review of session 1-8
Homework 4 due
(2) Group discussions or
Topic
presentations
10
11
12
13
14
15
16
17
18
Equity Valuation Model
Ch. 18
Options Markets Introduction Ch. 20
and Option trading strategies
Black-Scholes Valuation Model (1) Ch. 21
(2) Discussions of call
warrants and TSE Index
Option
Forward, Futures and Swaps
(1) Ch. 22 and 23
Risk Management
International Diversification
Project presentation
Hedge Funds and Active
Portfolio Management
Final exam
Homework 5 due
Homework 6 due
Ch. 21-23 and Class Notes
Ch.25
(1) Summary of session 10-15
(2) Group discussions
(1) Ch. 26 and 27
Homework 7 due
(1) Review of session 1-17
(2) Group discussions or
presentations