• Explain the concepts, theories, models, and methods for portfolio selection, risk measurement and management, the risk-return tradeoff, and the pricing of stocks, bonds, and derivative securities as discussed during the course.
• Discuss the theoretical and empirical validity of the central theories and models developed in the course.
• Apply the theories and models to realistic problems.
• Implement relevant models using Excel or similar computational tools
• Discuss the role of capital markets, the efficiency of capital markets, and theories about investor behavior

The objective of the course is to develop a deeper understanding of the role and inner workings of financial markets and financial instruments such as stocks, bonds, and derivatives. We will place particular emphasis on helping you develop a systematic way of thinking about and making investment decisions.

The topics we will explore include the following:
• the basics of risk and return
• the investment process and the importance of asset allocation
• how financialmarkets operate
• portfolio theory and how to form optimal portfolios
• index models, alphas and betas
• equilibrium models of security prices, including the Capital Asset Pricing Model
• security price anomalies such as the size, book-to-market, and momentum effects in stock returns
• the behavioral approach to finance and its role in understanding price anomalies
• the role of fixed income securities in the portfolio
• the use and valuation of derivatives

Bodie, Kane and Marcus, Investments and Portfolio Management, McGraw-Hill, 9th edition

Lecture notes