Faculty: Dr. C. P. Gupta Department of Financial Studies South Campus, University of Delhi Delhi.

SECURITY AND PORTFOLIO EVALUATION THE COURSE

The World of Financial Investment is a fascinating one - full of promises, challenges, excitements, joys as well sadness. But, the best part about it is that one can enter this World without any restriction, can actively participate in the whole process of investment decision making and see the results of his/her own decisions. However, this place is not simply for FUN but a serious one. Therefore, Security and Portfolio Evaluation is a serious subject matter and of late, it is becoming more and more technical and thus, assuming largely a shape of SCIENCE. Nevertheless, it is still to some extent an ART. This Course will focus on the Science as well as Art aspect of Security and Portfolio Evaluation. For pedagogical reasons, the whole course is divided broadly into two modules - first module will be dealing with fixed income securities, i.e. bonds while second module on variable income securities, i.e. equities. Whatever securities we shall be discussing the framework will be as thus - first understand about the security; next, evaluating the security in terms of its risk and return parameters; next, proper valuation at which one should buy the security; next, how to reduce the risk through diversification and by constructing suitable portfolio of securities; and finally, how to evaluate the performance of that portfolio. The Course is aimed at equipping the participants with necessary knowledge, tools and skills to evaluate securities under consideration; to make suitable portfolios to take the advantages of diversification and to evaluate their performance. By the end of the Course, it is expected that the participants must feel themselves as one of the competent and confident players of financial markets as an investment manager.

Career
Investing in appropriate financial assets is becoming day by day a highly specialized job. To provide such specialized services, a number of institutions have emerged in financial markets like investment firms and mutual funds. These institutions look for those finance professionals who can evaluate scientifically fixed income securities as well as variable income securities; who are capable of making optimum portfolios of various securities for themselves/clients; and who can provide constantly objective ways of monitoring the performance of various investment managers. Further, the corporate also requires investment analysts to invest their unutilized funds so as to earn maximum returns with commensurate level of risk. The present course is aimed to prepare the participants to look for career as an investment analyst in corporates, investment firms, mutual funds and other financial institutions.

Pedagogy
The thrust of the pedagogy adopted would essentially be problem solving. Sessions are designed to take up problems related to Security and Portfolio Evaluation either through cases or through some events reported in financial media and then, deliver necessary technical and conceptual knowledge through lectures and to appreciate the diversity of various issues through discussions. The main emphasis will be on the training of minds to be sensitive to various pieces of information and issues. A number of problems in the form of assignments will be given to the participants and they will be encouraged to use computers to find solutions of the problems. Students will be asked to make their own portfolios and track them over the Course. On the whole, the driving force behind the pedagogy will be learn and apply.

INVESTMENT MANAGEMENT Session No. 1&2 Topic Introduction and overview of Investment Management; two parametric framework to analyse a security and a portfolio; risk and return their determination and trade-off. Bond Valuation; Term Structure; Analysis of Risk in Bonds Duration and Convexity; Bond Portfolios. Readings/Referenc es/Cases CPJ: Ch. 1 FJ: Ch. 1 and Ch. 3 CF: Ch. 1 and Ch. 2

3, 4, 5

6 7, 8, 9

CPJ: Ch. 8 And Ch. 9 FJ: Ch. 9 CF: Ch. 12, Ch. 13 And Ch. 14. Reading On Bond Price Volatility Case For Discussion: Durations Paradox!!! Articles For Discussion: A TwoWay Street, Alright! and Admiring those shapely curves. Approaches to Security Evaluation CPJ: Chs. 10,11, 13, Fundamental Analysis and Technical 14,15, 16 Analysis A framework Fundamental and Technical Analysis FJ: Ch. 4, Ch. 5, Ch. a detailed analysis. 6, Ch. 7, Ch. 8, and Ch. 16 CF: Ch. 15, Ch. 16 and Ch. 17. MP: Chs. 7-11 and Chs. 18-19. Cases For Discussion: Finolex Cables Limited and Hero Honda; and some other companies listed at BSE. CPJ: Ch. 12 FJ: Ch. 16
3

10

Efficient Market Hypothesis

11 13

Modern Portfolio Theory Measurement of return and risk of a portfolio; dominance principles for reducing the choice set; Utility Theory and Markowitz Portfolio Theory.

CPJ: Ch. 19 FJ: Ch. 17 CF: Ch. 9 and Ch. 19 Case For Discussion: A number of companies will be selected from BSE. Single Index Model and Capital Asset CPJ: Ch. 20 Pricing Model FJ: Ch. 18 and Ch. 19 CF: Ch. 10 and Ch. 20 Evaluation of Portfolio Revision and CPJ: Ch. 22 Performance FJ: Ch. 19 CF: Ch. 21

Evaluation Three short-tests/quizzes (Best of Two) Mid-Term End Term Projects/Assignments 25% 35% 25% 15%

References:
1. Investments Analysis and Management Charles P. Jones; John Wiley & Sons, Inc. (CPJ)
2. Bond Markets, Analysis and Strategies - Frank J. Fabozzi; Prentice-Hall,

Englewood Cliffs, NJ. (FF)

3. Investments: Analysis and Management - Jack Clark Francis; McGraw Hill

International Editions, McGraw-Hill, Inc. New York. (CF)

4. Security Analysis and Portfolio Management - Donald E. Fischer and

Ronald J. Jordan; Prentice - Hall of India Private Limited; New Delhi. (FJ)
5. Modern Portfolio Theory and Investment Analysis - Edwin J Elton and Martin J

Gruber; John Wiley, New York. (EG)

6. Portfolio Construction, Management and Protection - Robert A. Strong; South-

Western College Publishing, Thomson Learning, USA. (RS)

7. Introduction to Investments - Haim Levy; South-Western College Publishing,

Thomson Learning, USA. (HL)

8. Investments-An introduction - Herbert B. Mayo; The Dryden Press, Harcourt

College Publishers, USA. (MA)

9. Quantitative Analysis for Investment Management - Robert A. Taggart;

Prentice-Hall, New Jersey, USA. (RT)

10. Technical Analysis Explained Martin J. Pring; McGraw-Hill, Inc. USA, Third

Edition. (MP)