LahoreUniversityofManagementSciences

FINN353Investments
FallSemester2015
Instructor
RoomNo.
OfficeHours
Email
Telephone
Secretary/TA
TAOfficeHours
CourseURL(ifany)

SamirAhmed
SDSB441
TBA
samir.ahmed@lums.edu.pk
03028260359
HassanHaider/TBA
TBA
suraj.lums.edu.pk

COURSEBASICS
CreditHours
Lecture(s)
Recitation/Lab(perweek)
Tutorial(perweek)

3
NbrofLec(s)PerWeek
NbrofLec(s)PerWeek
NbrofLec(s)PerWeek

Duration
Duration
Duration

75Minutes

COURSEDISTRIBUTION
Core
Elective
OpenforStudentCategory
CloseforStudentCategory

Elective
Junior/Senior

COURSEDESCRIPTION
An introductory course in the analysis of investments and portfolio management. The course examines various investment
opportunities available in modern financial markets, functioning of securities markets, diversification concepts, asset pricing
models,analyticaltechniquesforvaluationofstocksandfixedincomesecuritiesusingfundamentalandtechnicalanalysis,portfolio
construction and evaluation, and introduction to derivative securities. Central to the investment selection and management
process is the notion of portfolio diversification. We will consider how investors allocate their funds by forming and managing
portfolioscontainingstocks,bonds,mutualfunds,andalternativeinvestmentproducts.Studentsarealsointroducedtothemajor
portfolio management strategies and investment styles pursed by professional investors. An investment game will be played to
givestudentsabetterunderstandingoftradingstrategiesandportfoliomanagement.Thecoursefocusisonapplicationoftheory
tothepracticeofinvestmentmanagement.

COURSEPREREQUISITE(S)

PrinciplesofCorporateFinance

COURSELEARNINGOUTCOMES(CLO)

Uponsuccessfulcompletionofthecourse,studentsshouldbeableto:
1. Demonstrateunderstandingofthenatureandoperationsofcapitalmarketsandtradingofsecuritiesand
otherinvestmentvehicles.
2. Demonstrateunderstandingofthetheoreticalunderpinningsofinvestmentanalysisandportfolioconcepts
withinthecontextofmodernportfoliotheoryanditsextensions.
3. Demonstrateunderstandingofproceduresinvolvedinanalyzinginvestmentalternativesunderconditions
ofuncertainoutcomes.
4. Demonstrateapplicationofempiricalevidence,theoreticalconstructs,andinsightsfrompracticeto
manageinvestments.
5. Demonstrateunderstandingofthealternativemethodologiestoevaluateportfolioperformance.

LahoreUniversityofManagementSciences
6.
7.

Demonstrateknowledgeofderivativemarketsandinstrumentswithspecialattentiontotheirapplication
inmanagingportfoliorisk.
Presentanddefendtheiranalysiseffectively,bothinoralandwrittenforms,whileworkinginteamsas
wellasindependently.(GeneralLearningGoal)

UNDERGRADUATEPROGRAMLEARNINGGOALS&OBJECTIVES

GeneralLearningGoals&Objectives
Goal1EffectiveWrittenandOralCommunication
Objective:Studentswilldemonstrateeffectivewritingandoralcommunicationskills
Goal2EthicalUnderstandingandReasoning
Objective:Studentswilldemonstratethattheyareabletoidentifyandaddressethicalissuesinanorganizational
context.
Goal3AnalyticalThinkingandProblemSolvingSkills
Objective:Studentswilldemonstratethattheyareabletoidentifykeyproblemsandgenerateviablesolutions.
Goal4ApplicationofInformationTechnology
Objective:Studentswilldemonstratethattheyareabletousecurrenttechnologiesinbusinessandmanagement
context.
Goal5TeamworkinDiverseandMulticulturalEnvironments
Objective:Studentswilldemonstratethattheyareabletoworkeffectivelyindiverseenvironments.
Goal6UnderstandingOrganizationalEcosystems
Objective:StudentswilldemonstratethattheyhaveanunderstandingofEconomic,Political,Regulatory,Legal,
Technological,andSocialenvironmentoforganizations.

MajorSpecificLearningGoals&Objectives
Goal7(a)ProgramSpecificKnowledgeandUnderstanding
Objective:Studentswilldemonstrateknowledgeofkeybusinessdisciplinesandhowtheyinteractincluding
applicationtorealworldsituations.
Goal7(b)Understandingthesciencebehindthedecisionmakingprocess(forMGSMajors)
Objective:Studentswilldemonstrateabilitytoanalyzeabusinessproblem,designandapplyappropriate
decisionsupporttools,interpretresultsandmakemeaningfulrecommendationstosupportthedecisionmaker

Indicatebelowhowthecourselearningobjectivesspecificallyrelatetoanyprogramlearninggoalsandobjectives.

PROGRAMLEARNINGGOALSAND
OBJECTIVES

COURSELEARNINGOBJECTIVES

COURSEASSESSMENTITEM

Goal1EffectiveWrittenandOral
Communication

Studentswillbegivenanumber
opportunitiestodemonstratetheirability
tocommunicateeffectively(CLO#7)

CP,Projectwriteup&presentation,
Exams

AnalyticalThinkingandProblemSolving
Skillsareanessentialcomponentofthe
course(CLO17)
Applicationofinformationtechnologyin
forassignments,projects
Studentsworkingroupsforgroup
projects
Developstudentsunderstandingofthe
interactionofmicro(firmspecific)
variableswiththemacro(securities
markets,industry,andtheeconomy)
variables

CP,Quizzesandexams

Goal2EthicalUnderstandingand
Reasoning
Goal3AnalyticalThinkingandProblem
SolvingSkills
Goal4ApplicationofInformation
Technology
Goal5TeamworkinDiverseand
MulticulturalEnvironments
Goal6UnderstandingOrganizational
Ecosystems

Projectwriteup&presentation
Groupproject
CP,Projectwriteup&presentation,
Exams,quizzes

LahoreUniversityofManagementSciences
Goal7(a)ProgramSpecificKnowledge
andUnderstanding
Goal7(b)Understandingthescience
behindthedecisionmakingprocess

Adetailedintroductiontothevariousof
topicsinInvestments(CLO16)

CP,quizzesandexams

GRADINGBREAKUPANDPOLICY
CLASSROOMPOLICY
AttendenceandClassParticipation:10%.
Students are expected to attend all classes. If you are not present at the beginning of a class or leave class during the session,
withoutinstructorspriorpermission,youwillbeconsideredabsentfortheday.
Students must review the assigned materials in advance of the class in order to contribute meaningfully to class discussions. A
significantportionofthecoursegradedependsonthequalityandlevelofyourinvolvementandinputinclassdiscussions.

POLICYREGARDINGEXAMINAIONSQUIZZESANDOTHERGRADINGINSTRUMENTS.
Thereisazerotolerancepolicyforanyundesirablebehaviororundeservingattempttoimproveyourgradesduringthequizzes
and examinations. Such action can result in cancelling your examination paper. It may also result in disciplinary actions by
DisciplinaryCommittee.
Pleasecarefullyweighinyouractionscostsandbenefitsandalwaysshowanethicalandmoraldeportmentandbehavior.

Quiz(s)andAssignments:20%.
Severalunannouncedquizzeswillbegivenontheassignedmaterialduringtheterm.Nomakeupquizzeswillbegiven.However,
the lowest quiz grade including a zero for a missed quiz will be disregarded. No sharing of calculators, or any help sheet be
allowed.

Therewillbeseveralgradedassignmentsduringthetermtoreinforcefinancialconceptsandtoencourageusageofspreadsheets
suchasExcelinperformingfinancialanalysis.Theformatandotherrequirementswillbespecifiedbytheinstructor.Allassignments
mustbesubmittedontheduedate.Latesubmissionswillnotbeaccepted.Inaddition,nongradedendofchapterproblemsmay
beassignedtostimulateclassdiscussions.

MidtermExamination:20%
TheexaminationcouldbemixofMCQshortexerciseandshortexplanations.
Thereisazerotoleranceforanyundesirablebehaviortoundeservingattempttoimproveyourgradesduringthequizzesand
examinations.

GroupProjects25%:Studentsarerequiredtoformteamsof34students(dependingonclasssize)bysession4forgrouptasks.(i)
Sector Report: Each group will select an industry sector/subsector and perform industry and fundamental analysis of at least 2
leadingcompaniesinthatsector.Thesectorsfortheanalysismustbeapprovedbytheinstructor.Thesectoranalysisreportswillbe
th

dueatthebeginningofthe27 classsession.Latesubmissionswillnotbeaccepted.Apeerevaluationformwillbeprovidedto
evaluatecontributionofeachgroupmember.Yourpeerevaluationwillimpactyourgradeontheprojectreport.(ii)Investment
Game:Eachgroupwillbeentrustedwiththesameamountofinitialinvestmentandwillbeaskedtomanageaportfolioofstocks
onbehalfofaclientforacertainamountoftime.Portfolioperformancewillbeevaluatedonthebasisoftotalreturnattheendof
thegame.(iii)MoneyMastersReport:MultipleteamswillbeassignedaninvestmentgurufromtheMoneyMasterstopreparea
briefwritupandbereadyforapresentationontheassignedpersonaspertheclassschedule.Thepresentationshouldfocuson
the investment strategies, investment insights (Dos and Donts of investments), including key personal traits. Students are
encouragedtousetheInternettoobtainmorecurrentinformation.

FINALEXAMINATION:25%.
TheexaminationcouldbemixofMCQshortexerciseandshortexplanations.Studentsmayalsoexpectaquestionortwofromthe
assignedreportoracaseorasituationanalysis.
Calculator Requirement: You will need a financial calculator capable of performing present value/future value functions. For
example,TexasInstrumentBAIImeetsthesecriteria.Manyotherbrandsareequallysuitableforthiscourse.

LahoreUniversityofManagementSciences
EXAMINATIONDETAIL
Midterm
Exam

FinalExam

Yes/No:Yes
CombineSeparate:N/A
Duration:2Hours
PreferredDate:Week8
ExamSpecifications:

Yes/No:Yes
CombineSeparate:N/A
Duration:2Hours
ExamSpecifications:

COURSEOVERVIEW/SCHEDULE
LECTURE/MODULE
TOPICS

RECOMMENDED
READINGS

Module1:OverviewofInvestmentEnvironmentandManagementProcess
Session1
Investments:Backgrounds
andIssues
BKMCh1,2
AssetClassesandFinancial

Instruments
Session2
AssetClassesandFinancial
Instruments:StockandBond BKMCh2
MarketIndexes

Session3
FunctioningofSecurity
MarketsandTrading
BKMCh3
Mechanisms

Session4
FunctioningofSecurity
MarketsandTrading
BKMCh3
Mechanisms

Session5
MutualFundsandOther
BKMCh4
InvestmentCompanies

Session6

Session7

Session8

MutualFundsandOther
InvestmentCompanies
PakistaniContext
TheInvestment
ManagementProcess
TheInvestment
ManagementProcess

BKMCh4

BKMCh22

Macroeconomicand

BKMCh12

BKMCh22

OBJECTIVES/
APPLICATION
Overviewofinvestment
environment,typeoffinancial
markets,andintroductiontothe
portfolioconstructionprocess.
Examinethevariousasset
classes,instruments,and
understandtheuseand
constructionofmarketindexes.
Reviewthefunctioningof
financialmarketsanditskey
players.
Understandthetrading
practicesinstockexchangesand
mechanicsofbuyingonmargin
andshortselling.
Examinethebenefitsof
investingthroughinvestment
companies,classificationof
mutualfundsbyobjectivesand
styles,feestructures,and
performance.
Reviewthemutualfunds
industryofPakistan.Overview
oftheportfoliomanagement
process.
LearntodevelopInvestment
PolicyStatement(IPS)for
individualandinstitutional
investors.

Analyzetheeffectsof

LahoreUniversityofManagementSciences
IndustryAnalysis

Session9

Session10

Session11

Session12

Session13

Session14

Session15

Session16

Session17

Session18

Session19

Session20

macroeconomicandindustry
factorsonfirmperformanceand
industryearningprospectsover
time.
Understandtherelevanceof
macroeconomicandindustry
factorsinfundamentalanalysis
theTopDownapproach.

Macroeconomicand
IndustryAnalysis
ApplicationsofFundamental
Analysis

EquityValuation
DiscountedCashFlowModels

BKMCh12

BKMCh13

Applydiscountedcashflow
modelsandalternative
approachestovaluesecurities.

EquityValuation Other
ValuationApproaches

RiskandReturn:Pastand
Prologue
EfficientDiversification

DiversificationandPortfolio
Risk
SingleIndexModelandBeta
Estimation

CapitalAssetPricingand
ArbitragePricingTheory

BKMCh13

Examinerelativeandother
securityvaluation
methodologies.
Reviewhistoricalriskreturn
relationship,modernportfolio
theory,andestimationofrisk
measures.
Developunderstandingto
constructoptimalportfolios,
anduseindexmodelstoanalyze
riskcharacteristicsofsecurities
andportfolios.
Understandtheimplicationsof
capitalmarkettheoryforasset
pricing,usesecuritymarketline,
APTandmultifactormodelsto
identifymispricedsecurities.
Reviewempiricalevidencethat
supportsandconflictswiththe
efficientmarkethypothesis.
Evaluatetheimplicationsof
EMHforportfoliomanagement
strategies.
Reviewthebehavioralfinance
critiqueofstandardfinanceand
itsrelevanceforinvestments.
Overviewoftechnicalanalysis
toolsandmechanicsof
momentumtrading.
Developunderstanding ofthe
bondmarkets,pricingandyield
determination,andhow
differentbondfeaturesimpact
bondyields.
Analyzebondfeatures
impactingpricesensitivityto
interestratesusingdurationand
convexitymeasures.

TheEfficientMarket
Hypothesis(EMH)

EMHImplicationsfor
PortfolioStrategies

BKMCh5,6

BKMCh6

BKMCh7

BKMCh8

BKMCh8

BehavioralFinanceand
TechnicalAnalysis

TechnicalAnalysis
MomentumTrading

BondPricesandYields

BKMCh9

ManagingBondPortfolios

BKMCh11

BKMCh9

BKMCh10

LahoreUniversityofManagementSciences
Session21

ManagingBondPortfolios

BKMCh11

Session22

PortfolioPerformance
Evaluation

BKMCh18

Session23

Globalizationand
InternationalInvesting

BKMCh19

Session24

OverviewofOptions
Markets

FuturesMarketsandRisk
Management

BKMCh15

Session25

Session26
Session27
Session28

FinalExamination(Comprehensive)

Evaluateactiveversuspassive
bondportfoliostrategiesand
immunizationforvarious
investmenthorizons.
Understandvariousrisk
adjustedmeasurestoevaluate
performanceanddecompose
portfolioreturninto
componentsattributableto
assetallocationandsecurity
selection.
Examinethebenefitsandrisks
ofinternationalportfolio
investmentswithspecial
referencetoemergingmarkets.
Overviewoftheoptionsmarket
andtheirusageinchangingthe
portfolioriskprofile.
Understandtheuseof
derivativesinmanaging
portfoliorisk.

BKMCh17

Presentations

TEXTBOOK(S)/SUPPLEMENTARYREADINGS
RequiredText:
th

Bodie,Kane,andMarcus,EssentialsofInvestments,9 Edition,McGrawHill,2013.(BKM)
SelectedreadingsfromTheMoneyMastersandTheNewMoneyMastersbyJohnTrain,1980and1989,respectively.

OtherReferenceBooks:
th

Reilly,FrankandBrown,K.,InvestmentAnalysisandPortfolioManagement,8 Edition,ThomsonSouthWestern,2006.(RB
selectedchaptersonly)
th

Malkiel,Burton,ARandomWalkDownWallStreet:TheTimeTestedStrategyforSuccessfulInvesting,10 Edition,W.W.Norton
&Company,2012.

SupplementaryReadings:
StudentsareencouragedtoreadfinancialpublicationssuchasTheWallStreetJournal,FinancialTimes;BusinessRecordertostay
abreastofdevelopmentsrelatedtothiscourse.
Supplementalreadingsintheformofnotesorarticlesoninvestmentswithpracticalandtopicalapplicationsmaybepostedon
thecoursewebsitefromtimetotime.