Jaypee Business School A Constituent of Jaypee Institute of Information Technology (Deemed University) A-10, Sector 62, NOIDA, 201

307 India MBA 2011-13 Batch; Trimester IV July-October, 2012 Course Code: M4EAF21 Course Title: Security Analysis and Portfolio Management Course Credit: 3 Session Duration: 90 Minutes Name of the Faculty: Dr. Sujata Kapoor Email ID: sujata.kapoor@jiit.ac.in

1. Course Introduction
It is said a successful investor is one who sees the future before anybody else sees. This course would help in developing a structured thinking about how surplus capital can be invested in asset markets to generate adequate return. The objective of this course is to introduce the student to both the theory and applications of investment finance. This course is concerned with the characteristics and analysis of individual securities, as well as with the theory and practice of optimally combining securities into portfolio. The course begins with a discussion on fundamentals of investment to introduce students taking their first course in investments to the basic building block of modern investment thought. The course then proceeds to discuss how the characteristics of portfolio are significantly different from which they are formed. The discussion then shifts to equilibrium in capital market. Next, the course discusses the concept of market efficiency and the tests to see the level of efficiency of capital market. Towards the completion the course focuses on evaluating performance of portfolio. An emphasis will also be placed on investment analysis research through the group project. The student should obtain a broad knowledge of the asset allocation process, security markets, market structures, the risk-return characteristics of investment products etc. through the course materials, lectures, discussions, and assignments towards the completion of the course.

2. Course Objectives
To equip the participants with necessary knowledge, tools and skills to evaluate securities under consideration; To understand the investment options and the working of the markets. To acquaint with the aspects of analysis and valuation of the securities. To learn the tools and techniques of Fundamental and Technical analysis. To develop a relationship between risk and return in the light of behavioral finance. To learn the tools and techniques to maximize the returns.

3. Learning Outcome of the Course

The students will be able to develop an understanding of selecting investments in the global markets and making assets allocation decisions. develop an understanding of how to use the concepts of portfolio theory for the determination of risk return tradeoff and choosing best portfolio from the feasible investment portfolios. understand the implications of stock market efficiency for those engaged in technical and fundamental analysis as well as portfolio management. They would be able to form an opinion as to fairness of the market in the presence of irrational individual behavior.

Learn how technicians use several technical indicators for detecting changes in trends and analyzing securities. They would be able to use industry analysis as a tool for isolating investment opportunities that have favorable risk and return characteristics. develop a basic understanding of bonds and bond markets around the world. get a basic tool kit for evaluating the portfolio.

4. Text Book: Investments; Bodie Zvi, Kane Alex, Marcus J. Alan, Mohanty Pitabas, Eighth Edition; Tata
McGraw Hill,Eigth edition ,2009

5. Additional Readings and References:

Fischer Donald E., Jordan Ronald J., Security Analysis and Portfolio Management; Prentice - Hall of India Private Limited; New Delhi, Sixth edition, 2009 Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey; Fundamental of Investments, Prentice Hall of India Private Limited; New Delhi, Third edition, 2001. Reilly F., Brown K., Investment Analysis and Portfolio Management, Cengage learning publications, eighth edition, 2008. Kevin S. Security Analysis and Portfolio Management PHI learning PHI learning, 2006.

6. Evaluation Details a. Teachers Assessment

i. Quiz/Assignment ii. Project b. Mid-Term Test c. End-Term Test

30% 10 20 30% 40%

7. Session Plan
Session No. 1-5 Topics Readings Cases/Activities/ Exercises Practice exercises from Chapter 4, Parameswaran, K. Sunil, Equity shares, Preferred shares and stock market indices, McGraw hill education, Securities market series, 2007 MODULE I: THE INVESTMENT ENVIRONMENT Chapter 1, Gordon J. Alexander, Introduction to the investments William F. Sharpe, Jeffery V. Bailey; Fundamental of Investments, Prentice An overview about investment, Hall of India Private Limited; New its process and management objectives of & Challenges before Delhi, Third edition,2001 Investment Management Chapter 1 and 3,Fischer Donald E., Financial Instruments Jordan Ronald J., Security Analysis and Relationship between Risk and Portfolio Management; Prentice - Hall Return, of India Private Limited; New Asset Allocation Decision, The Capital Markets (Primary and Delhi,Sixth edition,2009 Secondary) Chapter 1,2,3,4 and 5, Reilly F., Brown Market Indices (Price weighted K., Investment Analysis and Portfolio index,Value- weighted index) Management, Cengage learning How securities are traded publications, eighth edition, 2008 Mutual Fund and other Investment Companies Text: Chapters 1, 2, 3, 4

MODULE II: DEVELOPMENT IN INVESTMENT THEORY 6 Risk and risk aversion Arnott, Bernstein P., What Risk Premium is Normal? Financial Understanding equities in terms Analysts Journal, March-April 2002 Practice Questions10, 11,12 of chapter 6 of text book

http://www.voxeu.org/index.php?q=nod of their risk return framework. e/4743(visited on 20/5/10 at 3:08pm) Bonds vs Equity Risk aversion Mathematics of Risk and Return of Equities and their portfolios. 7 Efficient Capital Markets and Behavioral Finance Chapter 4, Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey; Fundamental of Investments, Prentice Market Hall of India Private Limited; New Delhi, Third edition, 2001 Chapter 16, Fischer Donald E., Jordan Ronald J., Security Analysis and Portfolio Management; Prentice - Hall of India Private Limited; New Delhi, Sixth edition, 2009 Chapter 6, Reilly F., Brown K., Investment Analysis and Portfolio Management, Cengage learning publications, eighth edition, 2008 Chander, Ramesh; Sharma, Renuka; Mehta, Kiran.Dividend announcement and market efficiency: An empirical study of Indian stock Markets, ICFAI Journal of Applied Finance, Oct2007, Vol. 13 Issue 10, p29-42, 8-9 Modern Portfolio Theory Markowitz Theory Chapter 7 and 8, Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey; Questions 12 and 16 of Fundamental of Investments, Prentice - chapter 7 of the text What are the gains from a Hall of India Private Limited; New book Delhi, Third edition, 2001 Portfolio of risky assets? How to derive an Efficient Frontier using Mean-Variance Chapter 17, Fischer Donald E., Jordan Ronald J., Security Analysis and Dominance Principle? Portfolio Management; Prentice - Hall How to select an optimum of India Private Limited; New Delhi, portfolio? 2009 Limitations of Markowitz Model Chapter 7 Reilly F., Brown K., Investment Analysis and Portfolio Management, Cengage learning publications, eighth edition, 2008 Kate Delimitros, Paul Nowacki,, The Efficiency Frontier Framework: Using Markowitz Theory to Evaluate Outsourcing, (http://www.outsourcingjournal.com/may2009-everest.html visited on 15/5/10)

What is Efficient Hypothesis? Alternative Versions of Efficient Market Hypothesis. What are its implications for an investment manager?

10-11

Single Index Model and Capital Asset Pricing Model (CAPM)

Chapter 7 and 8, Gordon J. Alexander, Questions 5,6,7 of William F. Sharpe, Jeffery V. Bailey; chapter 8 of the text Fundamental of Investments, Prentice - book What is a Single Index Model and Hall of India Private Limited; New how does it help in estimation of Delhi, Third edition,2001 Systematic Risk and Unsystematic Risk? What is the impact on the Chapter 19, Fischer Donald E., Jordan Efficient Frontier introducing a Ronald J., Security Analysis and Portfolio Management; Prentice - Hall risk free asset into the market? of India Private Limited; New Why do investors hold same Delhi,Sixth edition,2009 portfolio of risky assets in a market? Derivation of CAPM. Chapter 8, Reilly F., Brown K., Implications of CAPM for Investment Analysis and Portfolio Management, Cengage learning Investment Management. publications, eighth edition, 2008 Testing of CAPM. Arbitrage Pricing Theory Grigoris Michailidis ,Stavros Tsopoglou ,Demetrios Papanastasiou,Testing the Capital Asset Pricing Model (CAPM) : The case of Emerging Greek securities Market , International Research Journal of Finance and economics, Issue 4, 2006 TEXT: Chapters 6,7,8, 9, 10, 11, 12 MODULE III: ANALYSIS AND MANAGEMENT OF COMMON STOCK

12-13

Approaches to security evaluation Fundamental Analysis Macroeconomic Analysis industry analysis Company analysis Technical Analysis A detailed analysis of charts, patterns, averages Momentum indicators Stock Price and Volume Techniques. Equity Portfolio Management Strategies An overview of Passive equity Portfolio Management Strategies An overview of Active equity Portfolio Management strategies

Chapter 13,15, Reilly F., Brown K., Questions 1,2,3,6 of Investment Analysis and Portfolio chapter 15, F. Reilly Management, Cengage learning and K. Brown, publications, eighth edition, 2008. Investment Analysis and Portfolio Desai, B. Liang, and A. Singh, Do All- Management, Cengage Stars Shine? Evaluation of Analyst learning publications, Recommendations, Financial Analysts eighth edition, 2006 Journal, May-June 2000 Text: Chapters 12, 17, 18, 19

14-15

Chapter 16, Reilly F., Brown K., Investment Analysis and Portfolio Management, Cengage learning publications, eighth edition, 2008.

Question 1 and 2 of Chapter 16, Reilly F., Brown K., Investment Analysis and Portfolio Management, Cengage learning publications, eighth edition, 2006.

MODULE IV: ANALYSIS AND MANAGEMENT OF FIXED INCOME SECURITIES- BONDS

16

An Advanced Understanding Fixed Income Securities Bonds Topics:

Chapter 20, Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey; Fundamental of Investments, Prentice Hall of India Private Limited; New Basic Features of a Bond, Measuring returns on bonds Delhi, Third edition, 2001 though Yield. Different concepts of yields: Chapter 9, Fischer Donald E., Jordan -YTM Ronald J., Security Analysis and -Holding Period Yield - Yield to Call Portfolio Management; Prentice - Hall of India Private Limited; New Delhi,Sixth edition,2009 Chapter 17,18,19, Reilly F., Brown K., Investment Analysis and Portfolio Management, Cengage learning publications, eighth edition, 2008 M. Kritzman, "What Practitioners Need to Know about Duration and Convexity," Financial Analysts Journal, September-October 1992

An assignment consisting of questions from above topic will be given to the students

Evaluating Bonds Risk Sources and Types of Risk. Interest Rate Risk and Duration. Relation of Duration with YTM, Maturity and Coupon Rate Convexity.

17

Bond Portfolio Management

Chapter 21 and 22, Gordon J. Alexander, William F. Sharpe, Jeffery Objectives of Bond Portfolio V. Bailey; Fundamental of Investments, Prentice - Hall of India Private Limited; Management. Strategies of Bond Portfolio New Delhi, Third edition, 2001. Management. - Passive Strategies Chapter 9 and 10, Fischer Donald E., - Semi Active Strategies Jordan Ronald J., Security Analysis and - Active Strategies Portfolio Management; Prentice - Hall of India Private Limited; New Delhi, Sixth edition,2009 Chapter 4, Bond Markets, Analysis and Strategies - Frank J. Fabozzi; Pearson Education, Fifth edition, 2008 Text: Chapters 14, 15, 16

Practice questions from chapter 2, 3, and 4, Fabozzi Frank J.;Bond Markets, Analysis and Strategies, Pearson Education, Fifth edition,2008

MODULE V: EVALUATION OF ASSET MANAGEMENT 18-20 Revision and Performance Evaluation of Portfolios Chapter 18, Gordon J. Alexander, Questions 7, 8 of William F. Sharpe, Jeffery V. Bailey; chapter 24 of text book Fundamental of Investments, Prentice How to construct optimum Hall of India Private Limited; New portfolio using different criterion? Delhi, Third edition, 2001 What are various revision plans? Evaluation of performance of a Chapter 20, Fischer Donald E., Jordan portfolio and a portfolio manager Ronald J., Security Analysis and

using

Treynor, Sharpe, Jenson and Fama Indicies

Portfolio Management; Prentice - Hall of India Private Limited; New Delhi, Sixth edition, 2009. Chapter 25, Reilly F., Brown K., Investment Analysis and Portfolio Management, Cengage learning publications, eighth edition, 2008 Text: Chapters 24