New: Homework 1

        Homework 2, Answers

Tao Wang
PH 300B
Telephone 997-5445
Office hours:  12:151:15pm every Wednesday and Friday
Classrooms:   Business 350: PH154

Course page:


Bus350: Investment Analysis


The course will focus on the application of financial theory to the issues and problems of investment management. We will try to understand the valuation and selection of various investment instruments first and then move on to cover portfolio optimization issues (plus risk management). This course is more analytical than usual. Topics will include bond valuation and strategies, stock valuation and strategies; portfolio optimization and asset allocation, the CAPM, and their implications for investment management. The course will build upon the analytical skills developed in the econ/bus241 finance core course. The topics covered are part of the requirements for the Certified Financial Analyst (CFA) Degree of the Association of Investment Management and Research (AIMR).


Prerequisites: the finance core course and a working knowledge of basic statistics.


Required: Frank Reilly and Keith Brown Investment Analysis and Portfolio Management, Thomson and Southwestern, 8th edition.[RB] The text package includes access to the learning-center website that facilitates the study of this material. This course intends to cover Chapters 1-9, Chapters 17-19, and possibly Chapters 10-11 of RB.
Recommended:          Philippe Jorion, Value at Risk.[PJ]

Course Requirements & Grading

There is one group case, three homework assignments, two midterms and one final exam. The case may be analyzed & submitted in groups of 3 or less. The case is worth 10% of the course grade, each homework needs to be turned in, and the final exam is 30%. Class participation is worth 5%. Case grades will be based on presentation (50%) as well as analytical quality (50%). Each case write-up should include an executive summary and clear, well-designed exhibits in powerpoint format.  The detail for the requirement of the case is enclosed HERE. The case is due on the date of the in-class discussion. For the case, we will have four or five groups presenting (each for 15 to 20 minutes) in class.


Homework                                                                  5%

Class Participation                                                        5%    

Cases                                                                          10%      December 1

Midterm 1                                                                   25%     October 13

Midterm 2                                                                   25%      November 17

Final                                                                            30%

GRADE DISTRIBUTION:  you will get the higher grade from  either 1) grade from a distribution that follows 15% - 20% As, 35% - 40% Bs, 30-35% Cs, 15% Ds or Fs

                                                                                                                                                                        Or 2)  grade from the following scale: 90+ As,  80-89 Bs,  70-79 Cs, 60-69 Ds, <60 F


Final exam date:          during the final exam week


Investment Analysis Course Outline




Reading, *means required

Lecture 1, Table

BUS350--Investment Analysis: Review of the course, Calculation of Returns (Geometric/Arithmetric), Index construction

*RB Chs. 1-5.

Lecture 2

Value at Risk

Jorion, Value at Risk Chapters 1-5 & Chapter 12. See *Value at Risk and

check Barry Schachter's website: Also, see: Asset Liability analysis


Lecture 3, Lecture 4, Lecture 5


Annuity & Bond Valuation

*RB Chs. 17-18.

Lecture 5a, example

Asset/Liability & Bond Strategies


*RB Chs. 18-19.


Lecture 5b, Lecture 6



Lecture 7, SP500 example

Efficient Market Hypothesis


*RB Ch. 6.



Portfolio Theory, Efficient frontiers in practice

*RB Chs. 7




Lecture 8, Lecture 9, Two Security portfolio model

Portfolio Theory, Efficient frontiers in practice

*RB Chs. 7,

Goetzmann & Edwards (1994): "Short Horizon Inputs and Long Horizon Portfolio Choice"

Lecture 10, Lecture 11


*RB Chs. 8

Fama, E.F. and K.R. French, 1992, The Cross-Section of Expected Stock Returns, Journal of Finance, 47, 427-465.

Black, F., 1993, Beta and Return, Journal of Portfolio Management, Fall, 8-18.

Lecture 12

Multifactor Models

*RB Ch 9

Fama, E.F. and K.R. French, 1996, Multifactor Explanations of Asset Pricing Anomalies, Journal of Finance, 51, 55-84.









Final Exam


Updated 8/30/2006