Investment Analysis [4876]
Investment analysis develops the concepts and tools needed to analyze publicly traded securities (e.g., stocks, bonds, options and futures), and apply these tools to real world situations. The course deals with the nature of the securities that trade in the market place, the determination of securities prices, the relationships between these prices, and the optimal choice of a portfolio or trading strategy involving these securities. This course will prepare you to understand and intelligently apply AFTP trading strategies.
- Course Objectives
Investment analysis develops the concepts and tools needed to analyze publicly traded securities (e.g., stocks,bonds, options and futures), and apply these tools to real world situations. The course deals with the nature of the securities that trade in the market place, the determination of securities prices, the relationships between these prices, and the optimal choice of a portfolio or trading strategy involving these securities. You will apply the tools you learn in class to analyze different fixed-income, equity, and derivative securities and portfolios. You will also learn some basic empirical facts about security returns in the class. Investment Analysis is not a course about how to pick stocks. Instead, it is a course about how to pick portfolios and design strategies. Generally, financial markets are efficient, so there is no such thing as a free lunch. Don't despair! This means that if you understand the basics of financial pricing models, you can find strategies that do well, on average. Once you understand basic arbitrage pricing techniques, you will learn how to identify and take advantage of arbitrage situations.
- Textbook
The textbook for this course is Modern Portfolio Theory and Investment Analysis, by Elton, Gruber, Brown, and Goetzmann, 7th edition (EGBG). I will hand out copies of my lecture notes as we go through the semester. I will put copies of the class lectures and supplementary reading materials on the AFTP course wall, which can be accessed from your profile.
- Instructor: Dr. Anisha Ghosh, Carnegie Mellon University
- Start Date: Monday, June 17 2013
- Duration: 7 weeks
- Difficulty: Introductory
- Prerequisites: See here
Topic | Readings | Week |
---|---|---|
Week 1: Course Introduction Course objectives and intended outcomes Main types of publicly traded securities Risk-return characteristics of securities Market indexes The economic theory of choice under certainty Market equilibrium |
Lecture slides EGBG Chapters 1-4 |
1 |
Week 2: Mean-Variance Analysis Mean-variance portfolio theory Characteristics of a portfolio of several assets Diversification Mean-variance efficient frontier Solution to the portfolio problem Implementing the portfolio problem |
Lecture slides EGBG Chapters 5-9 |
2 |
Week 3: The CAPM Motivation Assumptions and Derivation Implications Empirical Evidence |
Lecture slides EGBG Chapters 13-15 |
3 |
Week 4: Efficient Markets Hypothesis Definition Different forms of the EMH Empirical evidence on weak-form Empirical evidence on semi-strong form Empirical evidence on strong form Implications |
Lecture slides EGBG Chapters 17-20 |
4 |
Week 5: Bond Pricing Valuing bonds Bond prices and spot rates The term structure of interest rates Bond arbitrage Risk measurement for fixed income |
Lecture slides EGBG Chapters 21-22 |
5 |
Week 6: Option pricing Types of Options Put-Call Parity The Binomial Option Pricing Model The Black-Scholes Option Pricing Model |
Lecture slides EGBG Chapters 23 |
6 |
Week 7: Evaluation of Portfolio Performance Evaluation of Portfolio Performance Performance Evaluation in the Presence of Market Timing Portfolio Management Active Versus Passive Portfolio Management |
Lecture slides EGBG Chapters 25,27 |
7 |
- Evaluation
- Prerequisites
- Video Lectures: Weekly
- Assignments: Weekly
- Certification: Upon securing passing grade
- Time Commitment: 5-10 hours/week
- Collaborative learning:Yes. Click here
- TAs: None
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