Mgt 4412: Security Analysis & Portfolio Management

SYLLABUS
Management 4412A Finance University of Lethbridge Spring, 2007 Instructor: Class times: Class Room: Office: Office Telephone: Office Hours: Email: Robert Ironside, ABD Ph.D. (Finance) Monday & Wednesday, 13:40-14:55 FA W514 E576 403-332-5244 Tuesday 10:00 to 12:00 PM, or by appointment. robert.ironside@uleth.ca

PREREQUISITE: Management 3412 & 3470 COURSE MATERIALS: Investment Analysis & Portfolio Management, Frank K. Reilly & Keith C. Brown, 8th Edition, Thomson South-Western. An excellent supplementary text is Portfolio Construction, Management & Protection, Robert A. Strong, Thomson South-Western, 2003. COURSE OBJECTIVE: The purpose of this course is to introduce students to the theory and practice of security analysis and portfolio management. Topics will include evaluation of equity securities, bonds, and international investments and the role they play within a portfolio. The course builds upon the material covered in MGT 3412 and MGT 3470. Specifically, we will cover efficient markets theory, modern portfolio theory, asset pricing models, portfolio management strategies, and portfolio performance evaluation. Attention will be given to techniques used in building, managing, and evaluating the performance of portfolios of securities within the constraints faced by institutional investors. Portfolio construction will be analyzed through problems, assignments, and the study of research findings. Strategic and tactical asset allocation decisions will be discussed within the framework of institutional portfolio management. COURSE REQUIREMENTS: Grades will be determined by: 2 Midterm Exams (25% each) 1 Comprehensive Final Exam 2 Group Assignments

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Mgt 4412: Security Analysis & Portfolio Management

Course Format: Lectures, class discussion, assignments, group presentations and examinations . The format of the course will be an interactive-lecture format with frequent group presentations. Students are expected to actively participate in class, having read the assigned material prior to class. Given the volume of material, it will be impossible to cover all of the content during class. Academic honesty You are expected to adhere to the highest professional and ethical standards. Please become familiar with the University Policy on academic dishonesty. Those caught cheating will be penalized to the maximum permitted by University policy, which includes a final course grade of F and referral to the Dean for disciplinary action. Class Schedule: January 8 10 Class Orientation & Introductions The Economic Environment Readings: 1. Real Estate & the Post-Crash Economy, John Mauldin, http://www.2000wave.com/ 2. Forecast 2007: The Goldilock Recession, John Mauldin, http://www.2000wave.com/ 3. Quaterly Review & Outlook, Fourth Quarter, 2006, Van Hoisington & Lacy H. Hunt, in John Mauldins Outside the Box Ch 2 The Asset Allocation Decision - The Investor life cycle - The portfolio management process - The Investment Policy Statement Selecting Investments in a Global Market - The case for investing globally - Global investment choices - Historical measures of risk & return on alternative investments

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17

Ch 3

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Prepare for 1st Group Presentation Prepare for 1st Group Presentation Groups 1 5 (Alternative Investments) Groups 6 10 (Alternative Investments)

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Mgt 4412: Security Analysis & Portfolio Management

February

Ch 4

Organization & Functioning of Securities Markets - What is a market? - Primary capital markets - Secondary markets - Some Terminology Security Market Indexes - Uses of indexes - Factors in the construction of market indexes - Stock-market indexes - Bond-market indexes - Composite indexes - Fundamental indexes (fad or future)

Ch 5

12 14

Midterm Exam #1 (Chapters 1 5) Review Midterm exam Group #1: Canadian Exchanges Group #2: US Exchanges Reading Week (No Classes) Reading Week (No Classes) Group #3: Going Public The IPO Group #4: The Future for Investors by Jeremy Siegel Ch 6 Efficient Capital Markets - Why should the market be efficient? - The forms of market efficiency - Tests & results

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March

5 7 12

Group #5: Behavioral finance Group #6: Bubbles & Crashes Group #7: The Intelligent Investor by Benjamin Graham Group #8: Warren Buffet The Sage of Omaha Ch 7 An Introduction to Portfolio Management Strategies - Risk & return for a single asset - Risk & return for the two asset portfolio - Risk & return for the multi-asset portfolio Ch 7 An Introduction to Portfolio Management Strategies - Adding the risk-free asset - The Capital Market Line (CML)

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March

19

Ch 8 Introduction to Asset Pricing Models - The CAPM & the Security Market Line - Relaxing the Assumptions - Empirical tests of the CAPM Ch 8 Introduction to Asset Pricing Models - Systematic risk and return - The effect of size, P/E & leverage - Fama French Three Factor Model Exam #2 (Chapters 6 - 8) Group #9: Ubiquity Why Catastrophes Happen by Mark Buchanan Group #10: The (Mis)behaviour of Markets by Benoit Mandlebrot Ch 17 Bond Fundamentals - Characteristics of bonds - Rates of return - The global bond market Ch 18 Analysis & Valuation of Bonds - Bond valuation - Computing yields - Calculating future bond prices - Interest rates & term structure Stat Holiday (No Classes) Ch 19 Bond Portfolio Management Strategies - Bond portfolio strategies - Implications of Capital Market Theory & the EMH Ch 25 Evaluation of Portfolio Performance - Treynor Measure - Sharpe Measure - Jensen Measure - Other issues in portfolio evaluation

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26 28 April 2

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Students are expected to complete exams and projects at the scheduled times. Make-up exams will not be given except in extreme situations and with prior notification. Physical or Learning Disabilities: Please let me know if you have a physical condition or learning disability that may impact your academic activities in this class.

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Mgt 4412: Security Analysis & Portfolio Management

Grades A+ 95-100 A 90-94 A86-89

B+ B B-

82-85 78-81 74-77

C+ C C-

70-73 66-69 62-65

D+ D F

58-61 50-57 00-49

Group Projects Each group will be comprised of four students. Each group will prepare and present two topics to the class. The first presentation will be 12 minutes long and it will concisely summarize a particular type of investment. The second presentation will be approximately 30 minutes long and it will consist of an in-depth report on one of a wide variety of topics germane to the field of investments. Topics for Presentation #1: Group Topic # 1. Capital trusts. Example: BNS Capital Trust; HSBC Capital Trust, RBC Capital Trust 2. Exchange traded funds: iShares S&P/TSX 60 Index Fund; iShares S&P/TSX Capped Composite Index Fund; iShares S&P/TSX Capped Income Trust Index Fund 3. Exchange traded funds: iShares Scotia Capital Real Return Bond Index Fund; iShares Scotia Capital Short Term Bond Index Fund; iShares Scotia Capital Universe Bond Index Fund 4. Exchange Traded Funds: iShares MSCI EAFE 100% Hedged to CAD $ Index Fund; iShares S&P 500 Hedged to CAD $ Index Fund; iShares Dow Jones Canada Select Dividend Index Fund 5. Income Trusts: Boston Pizza Royalties Income Fund; Canadian Oil Sands Trust; Boardwalk Real Estate Investment Trust 6. Split Share Corp: Big 8 Split Inc; Top 10 Split Trust 7. Investment Funds: Brompton Advantaged Equal Weight Oil & Gas Income Fund; Brompton Advantaged Tracker Fund; Canada Trust Income Investments 8. Principal Protected Notes: Business Development Bank of Canada Global Equity Index Notes; CIBC Series 1 Blue Chip Notes; CIBC Nikkei 225 Notes 9. Principal Protected Notes: RBC Enhanced Return (Leveraged) Bear Notes due March 31, 2008 linked to the iShares Dow Jones U.S. Real Estate Index Fund 10. Principal Protected Notes: RBC 90% Principal Protected Notes linked to a basket of Base metals; RBC Cash-out Reverse Convertible Notes due June 29, 2007 linked to the Goldman Sachs Natural Gas Excess Return Index; For each presentation, you must: 1. Identify the primary investment characteristics of each asset 2. Identify the risks particular to each asset 3. Identify what type of investor the asset is most suitable for 4. Email your PowerPoint presentation to the class the evening prior to your presentation. Your PowerPoint presentation will form the core of the study material for the students that are not presenting that day, so please ensure that your PowerPoint is concise, comprehensive and suitable for study purposes. 5 of 5