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Investments (BA 4346

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Spring 2006 Professor Harold H. Zhang Email: harold.zhang@utdallas.edu Office hours: 1:30-3:00pm Tuesday or by appointment Course Objective 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. Telephone: 972-883-4777 Office: 3.806 SOM

Course Materials Teaching materials are drawn from several books, newspapers, and periodicals. There are assigned readings for each class. I expect students come to class prepared for the materials that will be covered that day (the required readings are identified as BKM# for the chapter in the textbook). 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. It would be wonderful if all your comments were brilliant, but that is an unreasonable standard for you and for me. You will find that a perfectly creditable performance can be turned in with reasonable preparation and diligence on your part. • • • • Required textbook: Essentials of Investments by Zvi Bodie, Alex Kane, and Alan Marcus, 5th edition, Irwin/McGraw Hill, 2004. Recommended periodicals and newspapers: Wall Street Journal, Business Week, Economist (most of the web editions are free, though you may need to register online). Books for fun: (1) A Random Walk Down Wall Street by Burton Malkiel. (2) Liar’s Poker by Michael Lewis. (3) Big Bets Gone Bad by Philippe Jorion. Movies for fun: Wall Street, Trading Places, Barbarians at Gate, Boiler Room.

Course Requirements There will be six written assignments, one midterm, and a final exam. The assignments are due before the class on the due date. I will not accept late assignments. If you have to be out of town for an emergency, you may want to make an arrangement to ask someone to turn in your assignment. I will drop the lowest grade on your assignments. The midterm and the final exam will be close-book. But you can bring one standard size (8.5 x 11) cheat-sheet (both sides) for the midterm and two standard size (8.5 x 11) cheatsheets (both sides) for the final exam. The course content builds on students’ knowledge learned in the introductory finance class. In light of the rapid growth of complex financial instruments to manage various financial risks, it is inevitable for us to use some basic mathematics to facilitate the analysis of these financial instruments. Although I will make an effort to keep the use of mathematics at minimum, some knowledge of calculus and statistics will be very helpful. Knowledge in spreadsheet (EXCEL or equivalent) is a must. We may have assignments involving extensive use of spreadsheet. Attendance is mandatory. If you miss a class, you will be responsible for the materials covered that day. I strongly discourage entering/leaving the classroom during the class because it distracts other students. My experience tells me that missing classes on a regular basis will put you in a disadvantageous position because not all class materials are covered in the textbook. I expect you to seek help from me in a timely way if you do not understand the course content and analysis. It would be hard to try to understand everything a few days before the exams. Grading Your grade will be based on your assignments, the midterm and the final exam. The weights are given below: Assignments Midterm Final Exam 25% 30% 45%

Grades will be curved based on the weighted average scores. Request for re-grading must be in written form. I will re-grade the entire exam upon receiving your written re-grading request. I expect that all the work will be done in complete observance of the University’s Honor Code.

Schedule and Course Outline

Date Jan. 10 Jan. 17 Jan. 24 Jan. 31 Feb. 7 Feb. 14 Feb. 21 Feb. 28

Topic Overview of Investments Money and Fixed-Income Markets Stocks and Indices Security Trading Mutual Funds Risk and Return Efficient Diversification Midterm Exam (in class) Spring Break

Readings BKM 1 BKM 2 BKM 2 BKM 3 BKM 4 BKM 5 BKM 6

Mar. 14

Capital Asset Pricing and Arbitrage Pricing Theory Market Efficiency and Portfolio Management Bond Characteristics Managing Fixed-Income Investments Equity Valuation Options Market

BKM 7

Mar. 21

BKM 8

Mar. 28 Apr. 4

BKM 9 BKM 10

Apr. 11 Apr. 18

BKM 12 BKM 14 and 15

Apr. 25

Final Exam (in class 4:00-7:00pm)