Textbook Information
- 978-1118011522 Damodaran, Aswath. 2012. Investment Valuation, 3rd Ed. Hoboken, N.J.: John Wiley and Sons (*) This textbook will also be readily available through the Penn State Libraries E-Book program at no cost to the student. Students do not need to purchase a physical copy of the book. Instructions for accessing the E-Book will be provided in the course.
- Additional Optional: 9780077861674 Bodie, Kane, and Marcus. 2013. Investments, 10th edition.
Important note to students for the required textbook above: An online version of your text is available at no cost as a Penn State Library E-Book. Some E-Books will only be available online, while others will be available to download in full or in part. You may choose to use the E-Book as an alternative to purchasing a physical copy of the text.
Published Remarks
- None
Hardware Requirements
- HP-10BII calculator or equivalent (Texas Instruments BA-II Plus).
Software Requirements
- None
Proctored Exams
- None
Course Description
In this course, students will provide research support for the Officers and Lead Analyst for the Intrieri Family Student Managed Fund, an actual investment fund that currently holds a stock portfolio of over $1 million. The student will serve as economic, industry, and security financial analysts and portfolio managers in concert with the Standards of Practice Handbook from the CFA Institute. These standards are integral to the curriculum for all three levels of the Chartered Financial Analyst exam.
Objectives
The course is designed to expand your knowledge of the field of investment analysis and portfolio management. We will examine the basic tools of asset valuation and inputs for portfolio management. Security analysis requires a thorough understanding of financial statement analysis, quantitative techniques, and macroeconomics. The major objectives of this course are for you to gain a working knowledge of the fundamentals of security analysis and portfolio management – including creating an investment policy statement, understanding security analysis, asset allocation, and optimal portfolio selection. We will also examine alternative asset classes and Global Investment Performance Standards (GIPS).The primary purpose of this course is to explore the concept of valuation. Throughout the semester, we will examine the theory of valuation for many types of risky financial assets. Though the theories have fairly broad applications, we will frequently apply them to pricing financial instruments, such as bonds, stocks, futures, and options. This course will lay a foundation upon which you will build in finance course electives. After this course, you should have a good understanding of arbitrage, derivative assets, currency exchange, interest rates, risk and return, portfolios and market efficiency. Although we will be using some market simulation software this semester, this is not a “fictional” course. You will have the opportunity to apply what you learn in this course to the management of the Intrieri Family Student Fund (hereafter “IFSMF” or “Fund”). We are dealing with real money here, folks! In conjunction with the SMF Officers and Lead Analysts (students who took this course in past semesters), you will be responsible for managing an actual investment portfolio that is currently valued at approximately $950,000. This experience will be invaluable for those of you preparing for future job interviews and professional careers within portfolio management or financial planning. Many of the concepts covered in this class will prepare you for professional exams (e.g. CFA, CAIA, CFP, FRM, etc.).
This course is designed around the Learning Objectives set out by the CFA (Chartered Financial Analyst) Institute for its Level I Exam. If you successfully master the material contained in this course, you will be well-prepared for this portion of the CFA Level I Exam. The Portfolio Analysis component of the Level I Exam is approximately 10 percent of the total exam. Almost all class materials are posted on Canvas. If you are not familiar with Canvas, please look at it prior to class. In addition, I strongly recommend that you bring a financial calculator to class. I will expect you to use a financial calculator with exponential and logarithmic functions when you work on certain problems.
COURSE DESIGN
This course is divided into two important time periods: Class Time and Your Time.
Class Time: Class time will primarily focus on lectures, problem-solving, and discussion of the financial concepts and tools found in the book. My view is that “leaning by doing” is the best way to understand these subjects. In class, I try not to review a lot of the material that you have already read in the textbook. Instead, I provide a broad overview and work with students to solve problems that require the knowledge contained in the book. I try to use my own experiences to extend that knowledge and apply it to ‘real world’ business situations and applications. It is important that you TAKE NOTES during class to help you learn.That is not because everything I say is important, but the process of taking notes helps you to understand the material and clarify concepts in your own words. Notes also provide an excellent source for review for homework, quizzes, and tests.
Your Time: To be successful in this class, you must read the assigned readings, complete the assignments, and participate in class. You will learn much more in class if you’ve already read the chapter/PPTs and attempted to work on the assignments well before the due date. If you put concerted effort into the Investment Challenges and Case studies, it will make it much easier to study for the exams and participate in the Investment Strategy Meetings (ISM’s). You will also be prepared to ask questions and clarify issues before you are tested on the material. Given the standard 15-week semester (and allowing for exams and review time), there are less than 40 hours that you will spend with an instructor this semester actually going over new course material. That means that the majority of your learning will occur outside the classroom. Research studies have shown this to be the case, and students who apply themselves conscientiously outside of class learn the most from their time spent during class meetings.
Assignments
HOMEWORK
Leaning by doing is the best way to understand Finance. I suggest you work the following problems in each chapter on your own or with your group. You should try to complete the homework for the chapters to be discussed in class, then work on any remaining questions during the week after the lecture date. The homework problems will form the basis for each of the Exams. If you choose to ignore the homework assignments, it will show on your exam grades. Homeworks will not be handed in or graded, and we will work through many problems during class. I suggest that you use the “discussion” area of Canvas to gain help from other students.
EXAMS
There will be two “mid-terms” and one final exam given during the course. The material for the first two exams will be drawn from the Homeworks. The final exam will examine your ability to integrate all of the material covered during the term. It will consist of approximately 25% each from Exams 1 and 2, with 50% coming from material covered after that.
INVESTMENT CHALLENGES AND CASE STUDIES (TEAM PROJECTS)
There will be five team research projects and four case studies required for the course. These will involve “real world” applications of the investment techniques we are studying. Some of these assignments will require “peer reviews” where you grade your teammates performance. Detailed instructions will be posted to Canvas.
RESEARCH NOTES AND PRESENTATIONS
Three times during the semester at Fund Investment Strategy Meetings (ISM’s), you will prepare research notes for two companies as a team: one that is currently in the SMF and one that you would like to purchase. You will also make three (5-minute) presentations that detail your recommendations.