Course Syllabus
Portfolio Theory
November – December 2014
Course
Portfolio Theory
Professor
Bill Reese
Tulane Office Phone: 504-865-5465
E-mail: wreese@tulane.edu
Office Hours: by appointment
Text
Investments 10th Edition by Bodie, Kane and Marcus
Prerequisites
Financial Management I and Financial Management II
Grading
In-class Exam
Assignments
Group Cases
Attendance and Participation
Objectives:
This course is concerned with the choice of investment strategies
with differing risk/return characteristics, in the presence of
uncertainty. We begin with a rigorous development of the
foundations of Modern Portfolio Theory while critically examining
the assumptions that lead to its conclusions. We will learn how
various market indexes are determined, explore the pros and cons of
market efficiency, and learn some of the founding principles of
behavioral finance. Students will have the opportunity to use several
instructor-created spreadsheets that obtain historical data on stocks
of the student’s choosing to create diversified portfolios,
mean/variance efficient portfolios, and calculate expected returns for
stocks using multiple asset-pricing models. We will see how
different investment management firms have used academic
research on momentum, value and market capitalization in their
managed funds. Harvard cases on various mutual funds, pension
plans, endowments, ETFs, and hedge funds will be included.
Group Cases
During the final weekend, four cases will be presented to the class.
You will need to separate yourselves into two groups. One group
will present the OTTPB and DFA cases. The other group will
present the Harvard Mgmt. Co. and Numeric Investors cases. Each
group will be presenting one case which involves Excel modeling
and one case which involves the application of academic research to
portfolio management. It is important that every member of each
team be involved in both cases for their group.
60%
15%
20%
5%
Assignments
Prior to the second weekend, you will need to complete two
individual assignments, and prior to the third weekend, you will
need to complete one individual assignment.
Website
I will be maintaining a website for this course at
http://info.freeman.tulane.edu/breeseemba/pmba_pt.htm Please
check out the class website on a regular basis.
Tentative Course Schedule
Date
Material
First Friday
Risk and Risk Aversion Pt. 1
Risk and Risk Aversion Pt. 2
First Saturday
Optimal Risky Portflios
Chapters
in BKM
6
7
Assignments Due Second Weekend:
Are You Diversified? Assignment
Efficient Frontier Assignment
View Terry Odean Video
Read Behavioral Finance at J.P. Morgan
Read De Bondt Paper
Second Friday Go Over Assignments
The CAPM
Using the CAPM
Second
Saturday
Multifactor Models
Market Indexes
Market Efficiency
Behavioral Finance
8, 9
10, 2, 11, 12
Assignments Due Third Weekend:
Comparing CAPM and FF 3-Factor Returns
OTPPB/ DFA
Harvard Mgmt. Co./Numeric Investors
Read Martingale, Barclays and Maverick Cases
Third Friday
Go Over Assignment
Professional Asset Mgmt.
Portfolio Eval. Measures
24, 26
Third
Saturday
Group Cases
Market Structure (if time)
3