Air University Islamabad

Department of Business Administration

Course Outline
I. COURSE INFORMATION

Course Title Investment Analysis and Portfolio Management

Class BBA- 7/8 & BSAF 6
Semester Fall 2020
Credit Hours 3
Case Studies 9
Prerequisites for this course
This course is prerequisites for: Completion of degree
Instructor Shoaib Ali
Email: Shoaiballi@mail.au.edu.pk
Address Room, Ground Floor, AUSOM
Mobile 0 Ext: 667
Office Hours (Consultation
hours for Students)
Text Book  Charles P. Jones. Investments Analysis and
Management
 Reilly and Brown. Investment Analysis and
Portfolio Management
 Kane Bodie Marcus. Essentials to Investments
Other Readings (If any)  Robert C. Radcliffe, Investment Concepts,
Analysis and Strategy, 4e
 William F. Sharpe et al., Investments, 6e

Course Description/Objective
The objective of the course is to study theory and empirical evidence relevant for
portfolio management. An emphasis is placed on understanding how an
investment professional would allocate funds in a hypothetical portfolio. Major
topics include estimation of capital market parameters, trade-off between risk and
return, optimal portfolio selection, equilibrium asset pricing models, and delegated
portfolio management. 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 course material is tilted heavily towards equity
markets since there are separate courses that cover fixed income markets and
derivative securities.
II. COURSE OVERVIEW/COURSE DESCRIPTION
This course deals with the analysis of three important and related macroeconomics issues in open
economies: exchange rates, capital flows and financial crises. The objectives of the course are two-
fold: to introduce and critically evaluate the main relevant economic theories, models and empirical
works in these three key areas of International Finance; and to apply these analytical tools to build
an understanding of relevant economic developments and policy issues in the global markets. Other
topics covered include trends in international banking, the balance of payments, Arbitrage, the
determination of exchange rates, the LDC debt crisis, Currency derivatives and value at risk
measures. The basic tenets of international finance are presented through a core textbook, assigned
readings and online lectures.

III. LEARNING OUTCOMES

By the end of the course, students will be able to:

1. Demonstrate knowledge of basic theorems of exchange rate determination, interest

rates and inflation and the role of arbitrage in keeping the foreign exchange market
efficient.

2. Apply knowledge of foreign exchange hedging to identify and manage the foreign
exchange risks faced by globally active firms.

3. Demonstrate the ability to select global financing strategies and propose solutions
that will take advantage of opportunities in the global financial markets to the benefit
of relevant stakeholders.

4. Demonstrate the ability to deliver an effective oral presentation with appropriate

visuals.

5. Demonstrate the ability to produce a clear and concise written report that
demonstrates higher order understanding of key concepts in international finance.

6. Demonstrate the ability to work in a team setting to coordinate analysis of a case

study to arrive at a sound financial decision regarding an issue in capital raising and
international valuation.
7. Explain the organization and institutional details of foreign exchange and
international money markets.
8. Explain and apply orthodox theories of exchange rates and open economy
macroeconomics, up to and including the Dornbusch overshooting model.
9. Explain and to give examples of modern central bank practice of monetary and
exchange rate policy implementation
10. Explain and apply insights provided by behavioral economics into expectations
formation and decision making on the foreign exchange market.
11. analyze the causes of historical exchange rate movements, and some of the
contributory factors to a variety of financial crises, with reference to the models
covered.
12. Apply the theories and models covered to the issue of optimal currency areas, with
 specific reference to the design and operation of the euro

Lecture Schedule
Please note, the following schedule is tentative. Changes can and will be made throughout the
semester as necessary, and all changes will be communicated to Class representative well
before time
Course Contents:

Session Contents Activity

1 Understanding Investments Jones Chapter 1
The nature of investments
Understanding the investment decision process
2 Global Economic System Notes Page 2-13
Factor Market
Financial Market
Product Market
3 Investment Alternatives Jones Chapter 2
Money market securities
Fixed-Income Capital Market
4 Indirect Investing Jones Chapter 3
Types of investment companies
Major types of mutual funds
5 The Returns and Risks from Investing Jones Chapter 6
Measuring returns Reiley Chapter 1
Measuring risk
Realized returns and risks from investing
Risk Free Interest
6 Portfolio Theory Jones Chapter 7
Portfolio return and risk Reiley Chapter 7
Diversification
7 Efficient portfolios
8 Portfolio Selection Jones Chapter 8
Indifference curves
Building a portfolio using Markowitz principles
9 Estimation of minimum variance portfolio
Impact of diversification on risk
10 Capital Asset Pricing Models Jones Chapter 9
Assumptions Reiley Chapter 8
Capital Market Line
11 Security Market Line
Pricing
12
Estimating the Security’s Beta
13 Case: Portfolio Selection and the Capital Asset
 Pricing Model
14 Case: Portfolio Diversification Enigma
Case: Lyxor ChinaH Versus Lyxor MS India
15
Portfolio Risk and Return

16 Case: Alex Sharpe's Portfolio

Arbitrage Pricing Theory Reiley Chapter 9

Theory of Arbitrage
17 Effects of Arbitrage
APT and CAPM
Multifactor CAPM Model
Index Model
18
Calculation and Interpretation
19 Common Stock Valuation Jones Chapter 10
Discounted cash flow techniques
Notes/Case: A Simple Free Cash Flow Valuation
20
Model
21 Case: Saito Solar - Discounted Cash Flow Valuation
22 Relative valuation techniques

23 Efficient Market Hypothesis Jones Chapter 12

Case: TALBROS AUTOMOTIVE COMPONENTS

24
LIMITED Relative Valuation
25 Economy/ Market Analysis Jones Chapter 13
Assessing the economy Reiley Chapter 12
26 Sector/ Industry Analysis Jones Chapter 14
Analyzing sector/ industry Reiley Chapter 14
27 Company Analysis
Fundamental analysis
Analyzing a company’s profitability
28 Earnings game Jones Chapter 15
P/E ratio Reiley Chapter 10
29 Case: Tesco
Case: Anandam Manufacturing Company Analysis of
30
Financial Statements

Grading and General Course Policies:

The grading will be done as per the policy of the university, however, the final grade for the
course will be determined based on the total points accumulated in the below areas with
following weightage:
Final Examination (45%)
Midterm ( 25%)
Quiz/Homework/Team Project (15 %)
 Presentation & Project (5 % )
Class Participation (10%)
Students will be assigned a team project related to the important issues of the subject.
Moreover, the students will visit at least one big organization and will write a report on their
visit.

Note:-
1. Students must bring text book and Scientific Calculator in the Class.
2. Active class participation will be rewarded by the grades.

3. Request for change in the deadlines of various class activities and the term
projects/presentations will not be entertained.
4. Each course will include the following:
a. At least 4 quizzes, all carrying equal weight age. The quizzes will be unannounced and there
will not any retake if a student misses a quiz.
b. Assignment: On the discretion of the Faculty Member/Course Requirement.

General Guidelines:
1. Students must bring text book and Scientific Calculator in the Class. Students are required to
have studied the relevant topics in advance from the course book.
2. Each written assignment should be prepared on separate sheet of paper in handwriting.
The front page of each assignment should contain the following information: -Course
Title -Name of the student -Assignment number -Date prepared -Date submitted. The
assignments should be submitted to class CR before the start of the class. The class CR
should ensure to submit them together to the teacher at the very start of the class.
3. There will be surprise Quizzes. A total of ‘03’ quizzes shall be taken. Quizzes and Assignments
will be returned after one week.
4. A term project may be included in your course. Detailed guidelines for term project will be
provided to you.
Class Participation

Class Participation is evaluated according to the following guidelines:

0 Absent.
 Present, not disruptive.
1  Tries to respond when called on but does not offer much.
 Demonstrates very infrequent involvement in discussion.
 Demonstrates adequate preparation knows basic case or reading facts but does not
show evidence of trying to interpret or analyze them.
 Offers straightforward information (e.g., straight from the case or reading), without
2 elaboration or very infrequently (perhaps once a class).
 Does not offer to contribute to discussion but contributes to a moderate degree when
called on.
 Demonstrates sporadic involvement.
 Demonstrates good preparation knows case or reading facts well, has thought
through implications of them.
 Offers interpretations and analysis of case material (more than just facts) to class.
3  Contributes well to discussion in an ongoing way responds to other students' points,
thinks through own points, questions others in a constructive way, offers and
supports suggestions that may be counter to the majority opinion.
 Demonstrates consistent ongoing involvement.
 Demonstrates excellent preparation: has analyzed case exceptionally well, relating it
to readings and other material (e.g., readings, course material, discussions,
experiences, etc.).
 Offers analysis, synthesis, and evaluation of case material, e.g., puts together pieces
of the discussion to develop new approaches that take the class further.
4
 Contributes in a very significant way to ongoing discussion keeps analysis focused,
responds very thoughtfully to other students' comments, contributes to the
cooperative argument-building, suggests alternative ways of approaching material
and helps class analyze which approaches are appropriate, etc.
 Demonstrates ongoing very active involvement.

IV. INSTRUCTIONS TO STUDENTS:

 Use of mobile phones in class is prohibited unless allowed by the teacher for a specific
purpose. During the class, Mobile phones should be in bags/pockets. Any student found
handling the mobile phone may be asked to leave the class.
 Make sure you attend all classes, read before class and make notes on your Handouts.
 In case/article class every student must possess hard copy of the case/article
 Every student is expected to participate in discussion. Raise your hand, wait for your turn
and let other students finish before volunteering to share your ideas.
 If you miss a class please make sure to catch up on the learning immediately.
 You can use a Spider Map to create an image of how different ideas and concepts link with
each other.
 Plagiarism and cheating in Quizzes/Assignments will not only earn a zero score for the
student concerned but the case may also be referred to the UNFAIR MEANS COMMITTEE of
 the University, which under the relevant rules is likely to award F GRADE in the course to
the student concerned.
 A student who lets his assignment/quiz to be copied by fellow students will also be
penalized and the case may be referred to the UNFAIR MEANS COMMITTEE of the
University, which under the relevant rules is likely to award F GRADE in the course to the
student concerned.
 If you use other resources, make sure to include proper references.
 You may be asked to leave the class for creating disturbance.
 Follow these steps to understand Finance
 Step 1: Just overview the chapter in advance before coming in class.
 Step 2: Attend lecture attentively (Ask question in case of any ambiguity during
class)
 Step 3: Read topic from book and solve exhibits of the chapter on lecture day.
 Step 4: After solving all exhibits, solve the “Self-Test Problem” of the chapter.
 Step 5: Solve exercise questions and problem of the chapter individually.
 Step 6: Then match your answers with your group fellow and discuss chapter issues
in class group; Moreover, you can take help from google, YouTube Tutorials and
from Finance website as well.
 Step 7: After following all upper instructions, if you have any query then discuss with
me.

 Follow these steps to solve case

 Step 8: Follow all upper 7 steps, then just read full case on weekend 2 times.
 Step 9: Find out the main issues of the case then pick relevant data related to main
issues.
 Step 10: Solve the case on your register and prepare answers of possible questions
individually at Home. Write your queries on register. Read and solve case on
weekend.
 Step 11: Do group discussion before case class and discuss your queries with group
members.
 Step 12: Come in class with case in hard form, solution of case on register,
calculator, name tag.