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Course BA 4346-001

Professor Catherine Xuying Cao


Term 2008 Spring
Meetings Saturday 10:00am-12:45pm (in SOM 2.717)

Professor’s Contact Information


Office Phone 972-883-4898
Office Location SOM 3.811
Email Address xxc041000@utdallas.edu
Office Hours Wednesday 6:00pm-7:00pm
Saturday 1:00pm-2:00pm
Or by appointment

Other Information I strongly urge you to use email to contact me outside of class. I will
check my email messages daily Monday through Friday and occasionally
on weekends, and you can be sure I will receive your message this way.
Feel free to stop by my office during office hours or email or call me to
set up an appointment.

General Course Information


Pre-requisites, Co- Pre-requisites: BA 3341, BA 3351.
requisites, & other Co-requisites: MATH 1326, MATH 2333 and STAT 3360
restrictions
The course assumes that you have completed introductory courses in
basic algebra, finance, accounting and statistics. You are expected to have
proficiency in (i) all mathematics up to calculus, (ii) accounting
principles, (iii) basic statistics, especially knowledge on probability
distributions, mean, variance, covariance, and regression analysis. (iv)
spreadsheet modeling in Microsoft Excel, and (v) internet skills such as
searching, email, downloading files, etc. If you have not completed the
necessary coursework or do not feel comfortable with the requisite skills,
you will find the concepts introduced in this course difficult. Please come
to me if you have any questions about the requirements.

Course Description The primary objective is to provide an understanding of the role of


modern financial theory in portfolio management and to present a
framework for addressing a wide range of issues in the management of
financial assets. The course will emphasize intuition and practical
applications of investment theory as well as some analytical analysis.
Topics to be covered include financial markets, portfolio theory and its
applications, and asset valuation. The course best suits the following
students (but not limited to):

 Those who want to know how to invest for their own benefit.
 Those who aspire to pursue a career in investment banking.
 Those who want to be a powerful security analyst.
 Those who want to become a professional money manager.

The course will be a blend of lecture and class participation. Most class
meetings will include a breakout session in which students work in groups
or individually to solve a problem or case.

Learning Outcomes By the end of the course, I hope you will be able to independently analyze
security markets, understand the available evidence and use it to make
investment decisions. The course will also improve the ability to read the
business press with a critical perspective. Specifically, there are three
objectives:

 Students will understand the characteristics of different financial


assets such as money market instruments, bonds, and stocks, and how
to buy and sell these assets in financial markets.

 Students will understand the benefit of diversification of holding a


portfolio of assets, and the importance played by the market portfolio.

 Students will know how to apply different valuation models to


evaluate fixed income securities, stocks, and how to use different
derivative securities to manage their investment risks.

Required Texts & Teaching materials are drawn from several books, newspapers, and
Materials periodicals. There are assigned readings for each class. I expect students
come to class prepared for the materials that will be covered that day. You
will find the materials much easier to grasp if you have read the assigned
materials in advance. I may make cold calls on students to answer
questions.

Essentials of Investments, Zvi Bodie, Alex Kane & Alan J. Marcus


(McGraw-Hill/Irwin, 7th edition, 2008).
Financial Calculator, such as the HP-12C or the TI BAII Plus

Suggested Texts, Wall Street Journal, Business Week, The Economist;


Readings, & http://finance.yahoo.com/;
Materials http://money.cnn.com/;
http://moneycentral.msn.com

Assignments & Academic Calendar


This agenda is subject to change. The exact timing of lectures and content of exams will depend
on the flow of the course.

Class Date In-class Activity Readings


Overview of investment
1 Jan. 12 Ch1 & Ch2
Financial Markets

2 Jan. 19 Security Trading Ch3

Mutual Funds Ch4


3 Jan. 26
Review Ch1-3

4 Feb. 2 Midterm 1
5 Feb. 9 Risk and Return Ch5

6 Feb. 16 Efficient Diversification Ch6

7 Feb. 23 Capital Asset Pricing and APT Ch7

Market Efficiency and Portfolio management Ch8


8 Mar. 1
Review Ch5-7

9 Mar. 8 Midterm 2

10 Mar. 15 Spring Break

11 Mar. 22 Bond Valuation Ch10

Mar. 29 Macroeconomics and Industry Analysis


12 Ch12 & Ch14
Financial Statement Analysis

13 Apr. 5 Equity Valuation Ch13

14 Apr. 12 Options market Ch15

Performance Evaluation and Active Portfolio


15 Apr. 19 Ch18
Management

Ch10,
16 Apr. 26 Review Ch12-15,
Ch18
17 May 3 10:00am Final Exam

Course Policies
Grading will be based on a combination of the following:
Class participation and In-class Problem-solving 8%
Homework and Quizzes on previous lecture 10%
Project 10%
Grading (credit)
Criteria
Investment Competition 2%
Midterm1 20%
Midterm2 20%
Final Exam 30%
Grades will be assigned based on the overall section performance.
Quizzes and In each class, there will be either a 15 min quiz on one of the previous
Exams homework problems or a problem-solving question that is related to that day’s
lecture.

Midterm exams and Final exam are both 3-hour non-comprehensive exams.
The quizzes, Midterm exams, and Final exam will be closed book. But you
can bring one standard size (8.5 x 11) cheat-sheet (both sides) for the midterm
and final exam. Calculators will be required.

If you miss a midterm you must have written documentation of a serious


illness from a physician. There are no make-ups and all scores will be added
into your overall evaluation.

You must attend final to receive a passing grade in this class.

Due dates and other details will be explained in class. Late submissions will
not be accepted for any reason. The work you submit must be yours alone;
incidents of copying, sharing, plagiarizing, or any other academic dishonesty
on the homework or the project notebook will result in a minimum two-letter-
grade penalty to the final letter grade of all involved plus academic discipline
Homework proceedings. The homework solutions and the project must not include input
Assignments from any unauthorized source (e.g., existing solutions to cases, students in
other classes, relatives, non-approved internet sources, other instructors or
professionals are all unauthorized). Do all your own work. You will learn
more, and the alternative is not worth the risk.
The homework assignments will be available on WebCT. The due day is to be
announced. I will post the solution on the WebCT after you have turned in the
assignment. No late homework is accepted.

What you turn in should look neat and professional. Please strive to make
your project easy to follow. The project is intentionally open-ended in order to
(1) allow you to learn how to retrieve some historical data on individual
stocks, (2) allow you to learn how to compute betas, average returns, standard
deviations, and (3) allow you to know how to build an efficient frontier. Just
as the jobs that you will have upon graduation will not involve hand-holding
on a day-to-day basis, neither does the project. Although you are welcome to
discuss the project with your classmates, the final work you turn in should be
Project your own. Thus, discussion is encouraged, but outright collaboration should
be kept to a minimum. You should expect the project to be challenging and
time-consuming. It is intended to help students develop marketable skills at
finding real-world data and applying course concepts to real-world situations.
The complete project is due by the 5:00pm of March 1, 2008. Late
submissions will not be accepted.

Details related to the semester project will be provided in a separate


document.
Investment Each student will invest $100,000 of "BA 4346" money. Each student can
competition purchase or sell short only NYSE stocks (no options, futures, or mutual funds
allowed) and can put at most $50,000 in any single stock at the beginning of
the game. Please check http://www.nyse.com/about/listed for stocks listed on
NYSE. You will get full grade for the investment competition (the 2% listed
under Grading) if you correctly compute and turn in your initial investment
selection, portfolio updates, and portfolio rebalance forms by their respective
due dates. Students can earn bonus points towards exams by posting superior
portfolio performance.
Details related to the investment competition will be provided in a separate
document.
You may bring your laptop computers to class, however you will not be
Laptops & permitted to have them open during the lectures, unless permitted by the
Cell phones instructor. You may not use your cell phones or other electronic
communication devices in class.
Lectures are an important part of the learning process. As I intend this to be a
highly interactive class, your participation in class discussion is demanded,
and is an integral part of how the course is structured. Participation points are
not automatic—you have to earn them.
Class Attendance
You may request a waiver from attending a class by sending me e-mail before
the class describing (a) the reasons for absence and (b) how you plan to cover
the material discussed in the class (you may be assigned additional problems
at my discretion).

I will establish a course web page on the Internet. Always check the WebCT
page before class. This site will include PowerPoint files of the course lecture
WebCT: Delivery notes, homework assignments, any external web links, and relevant updates
of Course about the class including any changes in assignments or exams. You will be
Materials responsible for bringing the relevant course notes to each lecture.
If a file or link is not operational, let me know via email ASAP so I can
correct the link. If you have any other problems using WebCT, contact the
UTD technology help desk.
Off-campus, out-of-state, and foreign instruction and activities are subject to state
Field Trip law and University policies and procedures regarding travel and risk-related
Policies activities. Information regarding these rules and regulations may be found at the
Off-Campus website address http://www.utdallas.edu/BusinessAffairs/Travel_Risk_Activities.htm.
Instruction & Additional information is available from the office of the school dean. Below is a
Course Activities description of any travel and/or risk-related activity associated with this course.

Technical If you experience any problems with your UTD account you may send an email to:
Support assist@utdallas.edu or call the UTD Computer Helpdesk at 972-883-2911.
Student Conduct
and Discipline The University of Texas System and The University of Texas at Dallas have rules and
regulations for the orderly and efficient conduct of their business. It is the
responsibility of each student and each student organization to be knowledgeable
about the rules and regulations which govern student conduct and activities. General
information on student conduct and discipline is contained in the UTD printed
publication, A to Z Guide, which is provided to all registered students each academic
year.

The University of Texas at Dallas administers student discipline within the procedures
of recognized and established due process. Procedures are defined and described in
the Rules and Regulations, Series 50000, Board of Regents, The University of Texas
System, and in Title V, Rules on Student Services and Activities of the university’s
Handbook of Operating Procedures. Copies of these rules and regulations are
available to students in the Office of the Dean of Students, where staff members are
available to assist students in interpreting the rules and regulations (SU 1.602,
972/883-6391) and online at
http://www.utdallas.edu/judicialaffairs/UTDJudicialAffairs-HOPV.html

A student at the university neither loses the rights nor escapes the responsibilities of
citizenship. He or she is expected to obey federal, state, and local laws as well as the
Regents’ Rules, university regulations, and administrative rules. Students are subject
to discipline for violating the standards of conduct whether such conduct takes place
on or off campus, or whether civil or criminal penalties are also imposed for such
conduct.

The faculty expects from its students a high level of responsibility and academic
honesty. Because the value of an academic degree depends upon the absolute
integrity of the work done by the student for that degree, it is imperative that a student
demonstrate a high standard of individual honor in his or her scholastic work.

Scholastic Dishonesty, any student who commits an act of scholastic dishonesty is


subject to discipline. Scholastic dishonesty includes but is not limited to cheating,
Academic plagiarism, collusion, the submission for credit of any work or materials that are
Integrity attributable in whole or in part to another person, taking an examination for another
person, any act designed to give unfair advantage to a student or the attempt to
commit such acts.

Plagiarism, especially from the web, from portions of papers for other classes, and
from any other source is unacceptable and will be dealt with under the university’s
policy on plagiarism (see general catalog for details). This course will use the
resources of turnitin.com, which searches the web for possible plagiarism and is over
90% effective.

The copyright law of the United States (Title 17, United States Code) governs the
making of photocopies or other reproductions of copyrighted materials, including
music and software. Copying, displaying, reproducing, or distributing copyrighted
works may infringe the copyright owner’s rights and such infringement is subject to
Copyright Notice appropriate disciplinary action as well as criminal penalties provided by federal law.
Usage of such material is only appropriate when that usage constitutes “fair use”
under the Copyright Act. As a UT Dallas student, you are required to follow the
institution’s copyright policy (Policy Memorandum 84-I.3-46). For more information
about the fair use exemption, see
http://www.utsystem.edu/ogc/intellectualproperty/copypol2.htm

The University of Texas at Dallas recognizes the value and efficiency of


communication between faculty/staff and students through electronic mail. At the
same time, email raises some issues concerning security and the identity of each
individual in an email exchange. The university encourages all official student email
correspondence be sent only to a student’s U.T. Dallas email address and that faculty
Email Use and staff consider email from students official only if it originates from a UTD
student account. This allows the university to maintain a high degree of confidence in
the identity of all individual corresponding and the security of the transmitted
information. UTD furnishes each student with a free email account that is to be used
in all communication with university personnel. The Department of Information
Resources at U.T. Dallas provides a method for students to have their U.T. Dallas
mail forwarded to other accounts.

The administration of this institution has set deadlines for withdrawal of any college-
level courses. These dates and times are published in that semester's course catalog.
Withdrawal from Administration procedures must be followed. It is the student's responsibility to
Class handle withdrawal requirements from any class. In other words, I cannot drop or
withdraw any student. You must do the proper paperwork to ensure that you will not
receive a final grade of "F" in a course if you choose not to attend the class once you
are enrolled.
Procedures for student grievances are found in Title V, Rules on Student Services and
Activities, of the university’s Handbook of Operating Procedures.

In attempting to resolve any student grievance regarding grades, evaluations, or other


fulfillments of academic responsibility, it is the obligation of the student first to make
a serious effort to resolve the matter with the instructor, supervisor, administrator, or
committee with whom the grievance originates (hereafter called “the respondent”).
Individual faculty members retain primary responsibility for assigning grades and
Student evaluations. If the matter cannot be resolved at that level, the grievance must be
Grievance submitted in writing to the respondent with a copy of the respondent’s School Dean.
Procedures If the matter is not resolved by the written response provided by the respondent, the
student may submit a written appeal to the School Dean. If the grievance is not
resolved by the School Dean’s decision, the student may make a written appeal to the
Dean of Graduate or Undergraduate Education, and the deal will appoint and convene
an Academic Appeals Panel. The decision of the Academic Appeals Panel is final.
The results of the academic appeals process will be distributed to all involved parties.

Copies of these rules and regulations are available to students in the Office of the
Dean of Students, where staff members are available to assist students in interpreting
the rules and regulations.

As per university policy, incomplete grades will be granted only for work
unavoidably missed at the semester’s end and only if 70% of the course work has
Incomplete
been completed. An incomplete grade must be resolved within eight (8) weeks from
Grades
the first day of the subsequent long semester. If the required work to complete the
course and to remove the incomplete grade is not submitted by the specified deadline,
the incomplete grade is changed automatically to a grade of F.

The goal of Disability Services is to provide students with disabilities educational


opportunities equal to those of their non-disabled peers. Disability Services is located
in room 1.610 in the Student Union. Office hours are Monday and Thursday, 8:30
a.m. to 6:30 p.m.; Tuesday and Wednesday, 8:30 a.m. to 7:30 p.m.; and Friday, 8:30
a.m. to 5:30 p.m.

The contact information for the Office of Disability Services is:


The University of Texas at Dallas, SU 22
PO Box 830688
Richardson, Texas 75083-0688
(972) 883-2098 (voice or TTY)
disabilityservice@utdallas.edu
Disability
Services
If you anticipate issues related to the format or requirements of this course, please
meet with the Coordinator of Disability Services. The Coordinator is available to
discuss ways to ensure your full participation in the course. If you determine that
formal, disability-related accommodations are necessary, it is very important that you
be registered with Disability Services to notify them of your eligibility for reasonable
accommodations. Disability Services can then plan how best to coordinate your
accommodations.

It is the student’s responsibility to notify his or her professors of the need for such an
accommodation. Disability Services provides students with letters to present to
faculty members to verify that the student has a disability and needs accommodations.
Individuals requiring special accommodation should contact the professor after class
or during office hours.
The University of Texas at Dallas will excuse a student from class or other required
activities for the travel to and observance of a religious holy day for a religion whose
places of worship are exempt from property tax under Section 11.20, Tax Code, Texas
Code Annotated.

The student is encouraged to notify the instructor or activity sponsor as soon as


possible regarding the absence, preferably in advance of the assignment. The student,
so excused, will be allowed to take the exam or complete the assignment within a
reasonable time after the absence: a period equal to the length of the absence, up to a
maximum of one week. A student who notifies the instructor and completes any
missed exam or assignment may not be penalized for the absence. A student who fails
Religious Holy
to complete the exam or assignment within the prescribed period may receive a
Days
failing grade for that exam or assignment.

If a student or an instructor disagrees about the nature of the absence [i.e., for the
purpose of observing a religious holy day] or if there is similar disagreement about
whether the student has been given a reasonable time to complete any missed
assignments or examinations, either the student or the instructor may request a ruling
from the chief executive officer of the institution, or his or her designee. The chief
executive officer or designee must take into account the legislative intent of TEC
51.911(b), and the student and instructor will abide by the decision of the chief
executive officer or designee.

These descriptions and timelines are subject to change at the discretion of the Professor.