LAL BAHADUR SHASTRI INSTITUTE OF MANAGEMENT, DELHI TWO-YEAR, FULL-TIME PGDM (FINANCE) TRIMESTER IV

Course Code: 224117 Academic Session: 2011-12 Course Title: Investment Analysis & Portfolio Management Instructor: Dr. Ashish Garg

COURSE OBJECTIVE
The objective of this course is to introduce the student to both the theory and applications of Investment analysis and Portfolio management. The subject will give an in-depth insight into the techniques for valuation of securities and the management and control of portfolios of financial assets. Emphasis will be put on development of techniques that should be part of the tool kit of those interested in becoming professional investors and/or researchers in finance. The emphasis is laid on (1) Portfolio objectives, (2) Trade-off between risk & return, (3) Industry sector analysis, (4) Company analysis and valuation (5) Portfolio formation, (6) Performance evaluation and (7) Efficient transactions, COURSE CONTENTS Module 1. The Investment Spectrum Session 1-2 Topic/Reading An overview of markets and instruments, various forms of investments, investment attributes, sources of investment uncertainties, approaches to investment decisionmaking, investment Style. Profile of Indian securities market, understanding trading systems in stock exchanges, rolling settlement, depository system and internet trading. Reading:

Bodie, Kane, Marcus, Mohanty-Chapter 1, 2, 3, 4 Reilly, Frank K. & Brown, Keith C.- Chapter 1
Charles P. Jones(9th edition) -Chapter 1, 2,3, 4,5 www.bseindia.com www.nsdl.com www.nseindia.com www.icicidirect.com www.sebi.gov.in Case: Warren E Buffet, 1995: Robert F. Bruner, Cases in Finance, Fifth Edition, pp.3-22. Elton & Gruber-Chapter 1, 2, 3

Module 2. Risk & Return

Session 3-4

Topic/Reading Classification of risk, relationship between risk and return, Characteristic line, Capital Asset pricing Model Arbitrage Pricing Theory, Single Index & multi factor Models. Reading: Elton & Gruber-Chapter 4, 5, 6, 7 Bodie, Kane, Marcus, Mohanty-Chapter 5, 6, 7, 8, 9, 10, 11, 12

Sharpe, Alexander & Bailey-Chapter 9, 10, 11

3. Efficient Markets 5-6 Strong , Robert A-Chapter 6, 7. Charles P. Jones(9th edition)- Chapter 6, 7, 8, 9 Efficient market theories, determinants of efficient market, strong, semi-strong and weak forms of market efficiency, Random Walk Theory and tests of market efficiency, Market anomalies. Empirical validation of asset pricing models and market efficiency, behavioral aspect in financial market. Investment strategies in efficient and inefficient markets. Readings: Bodie, Kane, Marcus, Mohanty-Chapter 12 Elton & Gruber- Chapter 17 Sharpe, Alexander & Bailey-Chapter 4 Charles P. Jones(9th edition)-Chapter 12 4. Security Analysis 7-10 Fixed Income Securities: Bond prices and yields, term structure and valuation, fixed income portfolio management. Equity Shares: Valuation models. Readings: Charles P. Jones(9th edition)- Chapter 17, 18

Bodie, Kane, Marcus, Mohanty-Chapter 14, 15, 16

Sharpe, Alexander & Bailey-Chapter 5, 13, 14, 15 Strong, Robert A-Chapter 13, 16 Case Study: GMO: The Value v/s Growth Dilemma, Darden Business Publishing, William Barton 4.2 Fundamental analysis, Economy Industry Company framework Readings: Frank K. Reilly & Edgar A. Norton-Chapter 11, 12, 13

11-12

Bodie, Kane, Marcus, Mohanty-Chapter 17, 18, 19

Charles P. Jones(9th edition)-Chapter 11, 13, 14, 15 Case Study: Mascom Telecom Case Study: Generation Investment Management, Harward Business Publishing Sandra J . Sucher; Daniela B Eyersdorfer, Ane Damgaard J E Nsen

Module

Session 13-14

Topic/Reading 4.4 Technical Analysis, basic tenets, tools, Dow theory, charts and trend lines, MACD and other models. Readings TESTS OF TECHNICAL ANALYSIS IN INDIA. By:
Sehgal, Sanjay; Gupta, Meenakshi. Vision (09722629), Jul2007, Vol. 11 Issue 3, p11-23, 13p, 6 charts; (AN 27024944)

5.Portfolio Management

15-18

Technical Analysis from A to Z by Steven B. Achelis. Donald E. Fischer & Ronald J. Jordan-Chapter 15 Charles P. Jones(9th edition)-Chapter 16 Case Study: TDL Electronics Portfolio construction, analysis, diversification and optimal portfolio choice, efficient frontier, Markowitz & Sharpe portfolio optimization, Portfolio evaluation and revision, Portfolio protection Readings: Elton & Gruber-Chapter 3, 8, 9 & 22 Sharpe, Alexander & Bailey-Chapter 6, 7, 8, 23, 24 Charles P. Jones(9th edition)- Chapter 21, 22

Bodie, Kane, Marcus, Mohanty-Chapter 24, 25, 26, 27

6. Project Presentations 7. Self-Study 19-20 Strong, Robert A.-Chapter 21, 22, 23

Group Project Presentations Portfolio management practices in Indian & International context. Reading: Merbert B. Mayo-Chapter 22 Stock Market Indices: Types, objectives, construction, revision, utility and limitations, growing role of floating index with special emphasis on Morgan Stanley Composite Index. Reading: Frank K. Reilly & Keith C. Brown-Chapter 5 Carry forward trading & its experience in Indian stock market Bullions & Real Estate-Nature, significance and impact on portfolio choice.

PEDAGOGY The teaching methodology is based on lectures, case studies, guest lecture on some current topics in this subject by some industry persons, active class participation through one major project on portfolio investment, real-life assignments involving thorough analysis and presentations. EVALUATION The course will be evaluated on the following basis:

End Term Examination Internal Assessment

60 marks 40 marks

INTERNAL EVALUATION The internal evaluation of the students will be based on the following basis: Group project 10 Individual assignments 10 Unannounced test / quiz 10 Case Study submission and Presentation 10 SUGGESTED READINGS Achelis, Steven B. (1995), Technical Analysis from A to Z, Visions Books. Bodie, Zvi; Kane, Alex; Marcus, Alan and Mohanty, Pitabas (2009), Tata McGraw Hill Chandra, Prasanna (2005), Investment Analysis and Portfolio Management, Tata McGraw Hill Elton, Edwin J. & Martin J. Gruber (2002), Modern Portfolio Theory & Investment Analysis, John Wiley. Fisher, Donald E. & Ronald J. Jordan (1995), Security Analysis & Portfolio Management, Prentice Hall of India. Gupta, L.C. (1997), Indias Stock Market Crisis, Society for Capital Market Research & Development. Jones, Charles P. (9th edition), Investments-Analysis and Management Reilly Frank K. & Keith C. Brown (2000), Investment Analysis & Portfolio Management, The Dryden Press Sharpe, William F, Gordan. J. Alexander, Jeffery V. Bailey (2002), Investments, Prentice Hall of India. Strong, Robert A. (2003), Portfolio Construction, Management & Protection, Thomson South Western College Publication

Course Project (10 marks) There will be one major project dealing with asset allocation. All students will be working on this project throughout the term, with sections due intermittently. We will apply the portfolio choice and diversification theory from class to some actual real-life scenarios. Extensive use will be made of Excel. The project must be done in groups. A final version of the project writeup must be submitted at the end of the trimester. All the groups would undertake the portfolio exercise involving the following dimensions: Portfolio objectives, Asset allocation, Identification of universe, Selection of securities, Portfolio construction, Portfolio revision, Portfolio performance evaluation, Portfolio protection The final project report should contain all the above mentioned sections. Submission date shall be told in the class. DETAILS OF ASSIGNMENTS INDIVIDUAL ASSIGNMENTS Every student has make a virtual portfolio available at various websites and on the basis of that they have to prepare a project report by specifying that what tactics they have used to manage that portfolio.

GROUP ASSIGNMENTS Fundamental analysis of selected companies in a particular industry as assigned to the groups. This fundamental analysis should be carried out as per Economy Industry Company framework. Technical analysis of selected companies. These companies would remain the same for each group as have been covered for fundamental analysis. Submission date The exact date would be announced after discussion in the class. But all the students are required to keep it ready before discussion in the class as they need to present their findings.