DEPARTMENT OF FINANCE

UNIVERSITY OF DHAKA
MPF PROGRAM: JANUARY-JUNE, 2018 SEMESTER
PF-632: PORTFOLIO MANAGEMENT
Instructor : Dr. H. M. Mosarof Hossain, Professor
Department of Finance, University of Dhaka
Class Schedule : 7:00 P. M. to 9:30 P. M. (Friday)
Class Room : 410 (Academic Bhaban)
Contact No. : 9661900-73, Ext. 8044; E-mail: mosaroffb@yahoo.com and
mosarof@du.ac.bd
Basic Information about the Course:
Credit Hours : 03
Contact Hours: 50

Evaluation Method: Class Attendance and participation 10

Two quizzes (2X5) 10
Tem paper preparation and presentation 10
1st Mid-term 15
2nd Mid-term 15
Semester Final 40
Total 100
Grading System:
Marks Range Letter Grade Grade Point
80% and Above A+ 4.00
75% to 79% A 3.75
70% to 74% A- 3.50
65% to 69% B+ 3.25
60% to 64% B 3.00
55% to 59% B- 2.75
50% to 54% C+ 2.50
45% to 49% C 2.25
40% to 44% D 2.00
Below 40% F 0.00
Course objectives: To provide an overall idea on investment and investment environment. To know
about different financial assets, financial markets and the different techniques of analysis for making
appropriate and intelligent investment decision. To choose the best sectors or industry, the best
company and the best financial asset through application of various analytical tools. To learn various
analytical tools and techniques for making investment in portfolio form for reducing unsystematic
risk. To measure risk and return related to different financial assets and to measure the performance
of made portfolio.

Course Description:
Name of Chapters Topics to be covered
01.The Investment Definition of investment; Measures of return and risk; Determinants
Setting of required rates of return; Relationship between risk and return.
02.Efficient Capital Definition, Assumptions, Alternative efficient market hypothesis,
Market Factors influencing prediction of return, Types of market efficiency.
03.Markets and The money market; The bond market; Equity securities; Stock Market
Institutions index; Derivative markets.
04. How Securities are How firms issue securities; Where securities are traded; Trading on
Traded exchanges; Trading on the OTC market; Trading cost; Buying on
margin; Short sale; Regulation of securities markets.
 05. Risk and Risk Risk and risk aversion- risk with simple prospects, risk, speculation
Aversion and gambling, risk aversion with utility values; Portfolio risk- asset
risk vs portfolio risk, a review of portfolio mathematics.
06. Capital Allocation Capital allocation across risky and risk-free portfolios; The risk-free
Between a Risky and a asset; Portfolio of one risky and one risk-free asset; Risk tolerance and
Risk -free Asset asset allocation.
07. Optimal Risky Diversification and portfolio risk; Portfolios of two risky assets; The
Portfolios Markowitz portfolio selection model;
08. The Capital Asset Demand for stocks and equilibrium prices; The capital asset pricing
Pricing Model model; Security market line; Capital market line and Characteristics
line.
09. Multifactor Models of Arbitrage pricing theory; Multifactor models and risk estimation; The
Risk and return APT, CAPM and the index model; Multifactor APT; The Fama-
French three factor model.
10. Equity Valuation Models for valuing common stocks, preferred stocks and
Model bonds/debentures.
11. Analysis of Financial Major financial statements; Analysis of financial ratios; Computation
Statements of financial ratios; Evaluating internal liquidity; Evaluating operating
performance; Risk analysis; Analysis of growth potential; External
market liquidity; Comparative analysis of ratios.
12 Stock Market Analysis Assessing the economy and the stock market- the business cycle,
Forecasts of the economy; Understanding the stock market;
Determinants of stock prices; Valuing the market- the earnings stream,
the multiplier.
13. The Analysis and The fundamentals of bond valuation: present value model, the yield
Valuation of Bonds model nominal yield, current yield, promised yield to maturity,
promised yield to call, realized yield; Calculating future bond prices;
Realized yield with differential reinvestment rates; Price and yield
determination on noninterest dates; Yield adjustments for tax-exempt
bonds; Bond yield books; Bond valuation using spot rates; What
determines interest rates; Calculating forward rates from the spot rate
curve; Term structure theories- expectations hypothesis, liquidity
preference hypothesis, segmented market hypothesis; Yield spreads;
What determines the price volatility for bonds?
14.Evaluation of Portfolio What is required of a portfolio manager? Composite portfolio
Performance performance measures; Evaluation of portfolio performance;
Reporting investment performance; M2 measure.

Text: Investment Analysis and Portfolio Management - Frank K. Reilly & Keith C. Brown (10th Edition)

References: Investmens – Zvi Bodie Alex Kane & Alan J. Marcus (10th Edition)
Modern Portfolio Theory and Investment Analysis- Edwin J. Elton & Martin J Gruber (8th Edition)

Examination schedule: Quiz # 01 on chapters 01-02; Mid-Term # 01 on chapters 01-04;

Quiz # 02 on chapters 05-06; Mid-Term # 02 on chapters 05-08; Final on all chapters
[More focus on chapters 09-14].