Investment Management
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[pic 1]Investment Management Course Outlinefor Session 2015-16Batch: PGDM 2014-16 Term: IVCourse (Finance Elective): INVESTMENT MANAGEMENT Credits: 2.5 Course Instructors: Prof D N Panigrahi and Prof J S Matharu Objectives of the course: The course inputs are designed to accomplish the following objectives.To introduce the students to the needs and concepts of investments in various asset classes (both financial and non-financial), but focus mostly on equity investments and fixed income (or debt) securities.To familiarize the students with the dynamic function of analyzing and evaluating individual securities (both equity and debt) by applying traditional methods of security analysis like fundamental and technical analysis as well as efficient market hypothesis and how to construct, manage, protect and evaluate a portfolio of securities in terms of the desired objectives of an investor or group of investors based on their return expectations and risk tolerance. To develop knowledge and skills of the students to make equity research reports based on economy, industry, company and technical analysis with the help of various databases like Capitaline, Prowess and Bloomberg and software like Excel. To study and analyze bond market (which is many times the size of the stock market), term structure of interest rates (yield curves) and strategies of managing a bond portfolio. To have a brief overview of derivative contracts like options and futures.Course Outline:This course mainly focuses on two areas : a. Security Analysisb. Portfolio Management.The Course will have three modules : a. Introduction to Investment, Financial Markets & Instruments.b. Security Analysis.c. Portfolio Management.Each module has several components within it. Please refer to the session-wise plan and readings for details.3.A Pre-requisites:This course assumes a basic knowledge of Accounting and Finance (like financial statement analysis and time value of money) and basic mathematics like elementary algebra, calculus, graphs and elementary statistics.3.B Link to other Subjects: a. Banks on the basic understanding of Financial Accounting, Management Accounting and Financial Management/Corporate Finance.b. This is the key finance discipline that will help you understand other specialized finance topics like Derivatives, Risk Management, Fixed Income Securities, Treasury Management, Financial Markets & Institutions and Bank Management etc.Students’ Learning Outcomes/GoalsOn sincere and successful completion of the course, the students will be able to:LO1: Understand and appreciate the distinguishing features of investments in various asset classes and their suitability to different investors/investor groups based on their needs, goals, planning horizon and risk tolerance etc. They will also understand the impact of external environment like inflation, interest rates, taxes, domestic and global market and geo-political conditions, economic policies like monetary and fiscal policies on the investment portfolio. – PLG3
LO2: Analyze and evaluate the stocks with the help of fundamental analysis and technical tools. – PLG3LO3: Prepare an equity research report based on Economy-Industry-Company (EIC) analysis and communicate to investors/investor groups. – PLG2.LO4: Construct portfolios and evaluate their performance. – PLG3.LO5: Analyze fixed income securities like bonds using fundamental analysis and manage bond portfolios. – PLG3.Program Level Goals (PLGs)PLG2. Develop effective communication skills and abilities.PLG3. Demonstrate decision making skills in solving business problems.Basic Text BookChandra, Prasanna, Investment Analysis & Portfolio Management (IAPM), 4/e Tata McGraw Hill 2012.Reference Books:Reilly, Frank K and Brown, Keith C, Investment Analysis and Portfolio Management (IAPM), 10th Edition, Cengage.Damodaran, A., Damodaran on Valuation, Wiley-IndiaJones, Charles P., Investment Analysis and Management, Eleventh Edition, Wiley India, 2012.Fischer, Donald E. and Jordan, Ronald J., Security Analysis and Portfolio Management, Pearson Education, 2004.Sharpe, William F., Gordon J. Alexander and Jeffery V. Bailey, ‘Investments’, Prentice Hall, 2002Bodie, Zvi, Alex Kane, Alan J Markus and Pitabas Mohanty, Investments, McGraw-Hill 8th Edition, 2009.7) Security Analysis (Text Book & Work Book) – By ICFAI8) Portfolio Management (Text Book & Work Book) – By ICFAI Magazines, Newspapers and Electronic MediaCapital MarketDalal Street Investment JournalEconomic Times, Business Standard, Business LineWatch CNBC-TV18, ETNOW, Bloomberg TV, Zee Business and CNBC Awaz Business News Channels regularly to gain real insights into the subject.E-resources/databases:-BloombergCapital LineProwessMeta StockWebsites like investopedia.comSession Plan:Session NoTopicsPre class preparations/ Assignments1Introduction to Investments, Financial Markets and Instruments Overview of Investment Process / Investment SettingInvestment Alternatives / Asset Classes and Financial InstrumentsChandra, Chapters 1, 22Asset Allocation Decision:Individual Investor’s Life CycleReilly & Brown, Chapter 2Lecture Notes3Securities Markets and Indexes – Local and GlobalReview of basic Maths and Stats for investments:Time Value of Money, Mean, Variance, Standard Deviation, Downside Semi Variance, Coefficient of Variation, Covariance, Correlation, Linear Regression, Graphs and equations of straight lines, simple algebra and calculus like log, matrices, derivatives etc.Chandra, Chapters 3, 5Security Analysis4Investment Risk and Return: impacts of tax and inflation, different measures of return and risk including Downside semi-variance, shortfall probability, expected shortfall, Value at Risk, Tracking Error etc., models of asset returns, Market/single index model for single security, security characteristic line, beta of a security, Capital Asset Pricing Model and Security Market Line for single security, Chandra, Chapters 4, 8Mini Case5Fixed Income Securities:Bond basics, Analysis and Valuation of bonds, Bond Prices and Yields, Bond value theorems, bond risks, yield curvesChandra, Chapter 11Mini Case6& 7Equity return and valuation modelsChandra, Chapter 13Mini Case8Fundamental Analysis:(Economy/Market Analysis, Industry/Sector Analysis and Company Analysis) – Equity and BondChandra, Chapters 14, 15Mini Case9Guest Lecture on Technical AnalysisChandra, Chapter 16Portfolio Management10Efficient Market Hypothesis and Behavioral Finance conceptsChandra, Chapters 9, 1011Mid Term Exam12Modern Portfolio Theory: Risk and return of a portfolio, Investor’s policy statement, portfolio selection and construction, Markowitz model: efficient frontier and portfolio diversificationChandra, Chapter 713Single Index Model, Sharpe’s optimal portfolio, Capital market theory, Capital Market Line, Capital Asset Pricing Model and Security Market Line, Arbitrage Pricing TheoryChandra, Chapters 7, 8Mini Case14Portfolio Management and Evaluation: Portfolio review and revision/rebalancing, passive and active portfolio managementChandra, Chapters 22, 23Mini Case15Institutional Investing and Professional Money Management:Portfolio Management Schemes, Hedge Funds, Mutual FundsChandra, Chapter 2416 & 17Bond Portfolio Management Strategies:Passive and Active Duration and Convexity and interest rate riskImmunizationChandra, Chapter 12Mini Case18 & 19Basics of Derivatives:Options, Forwards and FuturesHedging, arbitrage and speculationChandra, Chapters 17, 1820Guest Lecture