CRN | Subj | Crse | Sec | Title | Days & Time | Date (MM/DD) | Location | Office Hours |
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73190 | FNAN | 311 | 003 | Principles of Investments | M 19:20pm - 22:05pm | 08/29-12/10 | Robinson B220 | M 2-3pm |
This course is an introduction to portfolio management and asset valuation. The material focuses on institutional investing, although the course is also relevant for individuals. The class aims to provide an understanding of strategies and risk management tools necessary for the management of fixed income and equity portfolios. In particular, the class material covers asset allocation, risk and return trade-off, diversification, bond pricing, portfolio performance evaluation, and the theory of market efficiency. Upon successful completion of this course students will be able to (1) evaluate and explain the risk and return trade-offs in finance, (2) understand how to address behavioral and ethical issues in finance, and (3) conduct research necessary to construct and manage equity/fixed income portfolios and present their analysis. |
Degree Status and a grade of B minus or higher in FNAN 301. Prerequisite enforced by registration system. Students are expected to be familiar with basic economics and statistics. |
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The final grade will be based on a set of homeworks, a set of four quizzes, one midterm exam, a final exam, a portfolio project, and class participation. The grade allocation is:
The final grade will be based on all the points earned for the course. There will be a total of 1000 points. All exam questions will be 10 points each. A total of 60 exam questions (20 on the midterm, 20 on the final, and 20 on the quizzes) will carry 600 points. That is, 60% of the grade will come from exam/quiz questions. Homework questions will be 1 point each. Ten homeworks with 10 questions each will total a 200 points, or 20% of the course grade. In addition, all quizzes will be administered through Blackboard, during the last 35 min. of class. Some or all tests for the course will be administered through Respondus in Blackboard. Each question on these tests will be randomly selected from a pool of questions which share the same topic and level of difficulty. |
There will be no make-up midterm exams or quizzes. |
By registering for this class, students agree to abide by the honor code, which describes the standards of conduct, academic violations, and the treatment of academic offenses. The Honor Code states that all students "pledge not to cheat, plagiarize, steal, or lie in matters related to academic work." Visit http://oai.gmu.edu/the-mason-honor-code-2/ to read more about the GMU academic integrity code. The Business School policy on honor code violations in presented at the end of this document |
Week | Date | Topic | CH. | Learning Objectives |
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1 | Aug 29 |
ch01.pdf
Asset Classes and Financial Instruments
BEGIN PORTFOLIO PROJECT Webinar Slides PRTU guide PORT_guide |
2 |
LO2-1 Distinguish among the major assets that trade in money markets and in capital markets. LO2-2 Describe the construction of stock market indexes. LO2-3 Calculate the profit or loss on investments in options and futures contracts. |
2 | Sep 5 |
Labor Day. No classes. |
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2 | Sep 12 | Asset Classes and Financial Instruments(cont'd) | |
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3 | Sep 19 | Securities Markets | 3 |
LO3-1 Describe how firms issue securities to the public. LO3-2 Identify various types of orders investors can submit to their brokers. LO3-3 Describe trading practices in dealer markets, specialist-directed stock exchanges, and electronic communication networks. LO3-4 Compare the mechanics and investment implications of buying on margin and short-selling. |
4 | Sep 26 |
HW1(ch.2&3) DUE QUIZ I (5 questions, ch. 2,3) Risk and Return Risk and Return(new slides, pdf) |
5 |
LO5-1 Compute various measures of return on multi-year investments. LO5-2 Use data on the past performance of stocks and bonds or scenario analysis to characterize the risk and return features of these investments. LO5-3 Determine the expected return and risk of portfolios that are constructed by combining risky assets with risk-free investments in Treasury bills. LO5-4 Use the Sharpe ratio to evaluate the investment performance of a portfolio and provide a guide for capital allocation. |
5 | Oct 03 |
Risk and Return(new slides, pdf) Efficient Diversification |
6 |
LO6-1 Show how covariance and correlation affect the power of diversification to reduce portfolio risk. LO6-2 Calculate mean, variance, and covariance using either historical data or scenario analysis. LO6-3 Construct efficient portfolios and use the Sharpe ratio to evaluate portfolio efficiency. LO6-4 Calculate the composition of the optimal risky portfolio. LO6-5 Use index models to analyze the risk and return characteristics of securities and portfolios. |
5 | Tue Oct 11 (Mon class meets Tue) |
QUIZ II (5 questions, ch. 5) HW2(ch.5) DUE Efficient Diversification Efficient Diversification(pdf) |
6 |
LO6-1 Show how covariance and correlation affect the power of diversification to reduce portfolio risk. LO6-2 Calculate mean, variance, and covariance using either historical data or scenario analysis. LO6-3 Construct efficient portfolios and use the Sharpe ratio to evaluate portfolio efficiency. LO6-4 Calculate the composition of the optimal risky portfolio. LO6-5 Use index models to analyze the risk and return characteristics of securities and portfolios. |
6 | Oct 17 |
Efficient Diversification(pdf) CAPM and APT CAPM and APT(pdf) |
7 |
LO7-1 Use the implications of capital market theory to estimate security risk premiums. LO7-2 Construct and use the security market line. LO7-3 Specify and use a multifactor security market line. LO7-4 Take advantage of an arbitrage opportunity with a portfolio that includes mispriced securities. LO7-5 Use arbitrage pricing theory with more than one factor to identify mispriced securities. |
7 | Oct 24 |
HW3(ch.6) DUE MIDTERM EXAM (20 questions, ch.2,3,5,6,7) |
12 |
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9 | Oct 31 |
CAPM and APT(pdf) |
9 |
LO9-1 Describe several behavioral biases, and explain how they could lead to anomalies in stock market prices and returns. LO9-2 Explain why limits to arbitrage might allow anomalies due to behavioral biases to persist over time. LO9-3 Identify reasons why technical analysis may be profitable. LO9-4 Use indicators such as volume, put/call ratios, breadth, short interest, or confidence indexes to measure the ?technical conditions? of the market. |
10 | Nov 07 |
CAPM and APT(pdf) |
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11 | Nov 14 |
HW4(ch.7) DUE HW5(ch.7) DUE QUIZ III (5 questions, ch. 7) Portfolio Performance Evaluation Portfolio Performance Evaluation(pdf) Two-minute videos Slides |
18 | |
12 | Nov 21 |
HW6(ch.12) CANCELLED Portfolio Performance Evaluation(pdf) Portfolio Performance Evaluation |
18 |
LO18-1 Compute risk-adjusted rates of return, and use them to evaluate investment performance. LO18-2 Determine which risk-adjusted performance measure is appropriate in a variety of investment contexts. LO18-3 Apply style analysis to assess portfolio strategy. LO18-4 Decompose portfolio returns into components attributable to asset allocation choices versus security selection choices. LO18-5 Assess the presence and value of market-timing ability. |
13 | Nov 28 |
HW7(ch.18) DUE HW8(ch.18) DUE HW9(ch.19) CANCELLED Mutual Funds |
LO4-1 Cite advantages and disadvantages of investing with an investment company rather than buying securities directly. LO4-2 Contrast open-end mutual funds with closed-end funds, unit investment trusts, hedge funds, and exchange-traded funds. LO4-3 Define net asset value and measure the rate of return on a mutual fund. LO4-4 Classify mutual funds according to investment style. LO4-5 Demonstrate the impact of expenses and turnover on mutual fund investment performance. |
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14 | Dec 05 |
QUIZ IV (5 questions, ch.18) Hedge Funds HW10(ch.04) DUE PROJECT DUE |
20 |
LO20-1 Identify directional versus nondirectional or market-neutral investment strategies. LO20-2 Formulate "pure plays" on seemingly misaligned security prices, and identify the risks that are hedged in these strategies as well as the risks that remain. LO20-3 Cite the various difficulties entailed in evaluating hedge fund investment performance. LO20-4 Interpret incentive fees charged by hedge funds as implicit options and value them using option-pricing methods. |
Mon 12/19, 19:30--22:15 |
FINAL EXAM (20 questions, ch. 7, 18, 4, 20) |
School of Business Recommendations for Honor Code Violations
Proposed Spring 2016 Undergraduate Non-Freshman Students (including transfer students) |
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Type of Violation |
First Offense |
Second Offense |
Plagiarism |
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An F in the class; referral to the Writing Center; and Academic Integrity Seminar completion | An F in the class; referral to the Writing Center; Academic Integrity Seminar completion; termination from the School of Business; and at least one semester suspension or expulsion |
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An F in the class; referral to the Writing Center; and Academic Integrity Seminar completion | An F in the class; referral to the Writing Center; Academic Integrity Seminar completion; termination from the School of Business; and at least one semester suspension or expulsion |
Cheating |
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An F in the class; and Academic Integrity Seminar completion | An F in the class, Academic Integrity Seminar completion; termination from the School of Business; and at least one semester suspension or expulsion |
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An F in the class; and Academic Integrity Seminar completion, and at least one semester suspension | An F in the class, Academic Integrity Seminar completion; termination from the School of Business; and at least one semester suspension or expulsion |
Lying (e.g., providing fraudulent excuse documents, falsifying data) | An F in the class; and Academic Integrity Seminar completion, and at least one semester suspension | An F in the class; Academic Integrity Seminar completion; termination from the School of Business; and at least one semester suspension or expulsion |
Egregious Violation (e.g., stealing an exam; submitting coursework from another class as original work across multiple courses; lying to an employer about academic performance, false identification or posing as another, in person or online) | An F in the class, Academic Integrity Seminar completion; termination from the School of Business; and at least one year suspension | An F in the class; Academic Integrity Seminar completion; termination from the School of Business; and expulsion |