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Lebow College of Business

Drexel University
Finance 794 Professor Wes Gray
Investment Management Academic Building 209
Spring 2011 wgray@drexel.edu
Matheson 204 773-230-4727
http://faculty.lebow.drexel.edu/grayw

Syllabus for Finance 794—Seminar in Investment Management

1. Introduction

1.1. Course Description: This course is designed to provide an understanding of hedge fund
operations and strategies.

*** A primary goal of the course is to provide an opportunity to analyze and understand a variety
of trading techniques. The course is CHALLENGING and there is a lot of required reading—you
can expect to spend 6-8 hours a week on the course. If you do not have a desire to learn and will not
have the time to invest in the class, please DO NOT TAKE THIS CLASS.

1.2 Prerequisites: The course is an advanced course designed for students who want practical
knowledge and a worthwhile challenge. Students must have at least an intermediate understanding
of financial concepts. This course is highly quantitative: students should be comfortable with
probability, statistics, and regression analysis.

1.3 Grade Curve: Grades in this class are 100% transparent, so students can honestly assess their
performance against their peers. The class will be graded on a curve where the average class grade
will be a B+/A- (3.50 curve).

2. Course Requirements and Grading
The course requirements are class participation, a “strategy” presentation, a group presentation, a
trading and execution project, and 2 professional book reports. Your course grade will be
determined by the following table:

Grading Schedule
Class Participation 15%
Group Presentation (1 per group) 20%
Final Strategy Presentation (1 per group) 25%
Intelligent Investor Professional Report 10%
Little Book Professional Report 10%
Trading Performance and Report (1 per person) 20%

2.1. Class Participation: Class participation is a large portion of the grade for this course because
we will be discussing and thinking through case studies and listening to a lot of presentations.


 

com/category/trading-strategy-paper/ Your presentation can utilize the material presented on the website. and ends around 9:00 pm. and 2) an outline of the trading strategy discussed in the book (pretend you are writing this for your boss in a workplace setting). each group will be required to present (1) 30 minute “strategy” presentation. Group Presentations: Starting in the 6th week.m.3. If you must come late. however. and 2) your ability to address questions and concerns from the audience. Each lecture begins exactly at 6:00 p. 2. Professional Reports: You are required to read “The Intelligent Investor” by Benjamin Graham and “The Little Book that Still Beats the Market” by Joel Greenblatt. I understand your busy schedules. but try to be on time. 2    . Do not engage in side conversations and debates during the lecture. selected students in the audience will be required to complete a ‘peer review’ form with constructive feedback on the student presenters’ performance (one form per presenter). I require a 1-2 page professional memo outlining 1) the key learning points from the text.empiricalfinancellc. Groups can choose any of the trading papers highlighted on the blog: http://blog. [2] “The Intelligent Investor” report is due before in Week 10. please let me know beforehand.The class participation grade consists of the following:  Classroom attendance (not showing up to class will influence your participation grade!)  Prepared for class and can address questions related to cases and/or readings  Engaged in classroom discussion and peer presentations  Asking guest speakers engaging questions Your behavior should respect your classmates' desire to learn. 2. it is expected that you read and attempt to understand the source paper. The presentation should cover the following topics:  Strategy Overview o How does the strategy work? How does it perform?  Data Requirements o What data is required to implement? What data was used to backtest?  Discussion o What are the economics behind the strategy? Why does it work? Why are the markets inefficient?  Commentary o Are there any implementation issues? Liquidity? Short-sell constraints? o Any ways to improve the strategy? Following the presentation. turn it off before entering class. [1] “The Little Book that Still Beats the Market” report is due before in Week 4. If you carry a cell phone or any other type of `audible alert device'. You will be graded on 1) your ability to effectively and efficiently communicate the trading concepts.2.

RFS.com and implement your chosen strategy via a “student” account with Interactive Brokers. indicating that you adhere to the honor code. The student must determine the following variables for their investment policy:  Holding period. etc. limit orders. etc. and 3) the quality of the trading idea. Violations of the honor code will be prosecuted with a minimum penalty of failure for the course. The presentation will follow the same format as the “group presentations. and 3) analysis of performance relative to the S&P 500. Honor Code: You are responsible for maintaining Drexel's Honor Code which mandates zero tolerance for cheating and plagiarism. Trading Performance and Report: Starting in week 4 you will be required to identify your favorite quantitative trading strategy from http://data. 2) your ability to address questions and concerns from the audience.g.empiricalfinancellc. market orders. or similar websites.' It is in your best interest that the 3    . and the Wilshire 5000. You must include a signed statement at the top of each problem set and exam. the topic and analysis MUST BE UNIQUE:  Strategy cannot be discussed on http://blog.empiricalfinancellc. The second half of your grade will depend on a professional report due in week 10.4.empiricalfinancellc. Final Strategy Presentations: During the 10th and 11th week of class each group will be required to present a 30min professional presentation. JoPM.com o Google Scholar—e. VWAP algos. FAJ.) Along with the presentation you will be required to submit a write-up that follows the format found on http://blog. If you become aware of any violations of the honor code you must take whatever steps are necessary to stop the violators.  Potential ideas can be located from the following sources: o Internal discussion and research (not recommended) o SSRN.)  Strategy (s) employed You will be graded on your portfolio’s performance relative to your peers for half of the grade on this assignment. buy/sell rules  Risk management policy (s)  Trading and execution techniques (e. Top-quality submissions will be published to the blog.” however. enter “trading strategy.cxoadvisory.2. LLC (details will follow in week 4).com. The report should not be longer than 3 pages. the Russell 2000.com/. ***Ideas must be approved by the 8th week of class. The intent of this exercise is to give students hands on experience trading and executing a large portfolio (minimum of 50 stocks required). 2.*** 2.. JFE.com/.6. The statement is: `I pledge my honor that I have not violated the Drexel Honor Code in the completion of this exam/problem set. which summarizes 1) your investment policy. 2) key learning points from the trading exercise. as required by code of conduct rules. Your presentation will be graded on 1) your ability to effectively and efficiently communicate the trading concepts.” or “abnormal returns” o Academic Journals (JF. JOI. http://www.g.5.

Office Hours: I will hold office hours Tues 1300-1500.com/shop/ and search for ISBN: 9781121137769. They are not a substitute for attending class since the class discussion will add value to the notes and texts.5. Review Sessions. Assigned Readings: I will sometimes assign readings and/or notes which are relevant to the lecture.com/ccc?key=0AjJBfJ0Yq2btdGNBdk5qekRvWWNUcDNIX1RkbjJ nN3c&hl=en&authkey=COv1xO0F#gid=0 3. These readings will be provided via the course website. and TA 4. any edition 3. Group Work Guidelines: You will be allowed to work on presentations in groups of three to five people.1.7.2. If you encounter an interesting article that you would like to share with the class. any edition [3] “The Little Book That Still Beats the Market” by Joel Greenblatt. 3. If you would like to schedule an individual appointment for another time. Readings 3. The lectures slides provide an outline of the course discussion and some detail on the topics covered.2. Groups must be determined by the beginning of the second class and cannot change throughout the quarter. Class Material. You are responsible for reading and understanding these assigned readings. 3. it adds to the value of your degree.1 Handouts: Prior to each class I will post an information sheet with the following information:  Handouts for the day  Topics for the day  Readings for the day  Miscellaneous Announcements  To-do for the next class 3.mcgraw-hill. Wall Street Journal. Students who have questions or want to review previous material are encouraged to come to my office hours.3.google.4. Current News: You are encouraged to follow financial and macroeconomic news in the Financial Times. Simply reviewing the lecture slides and text material will not be sufficient to succeed in the course. Title: Seminar in Investments Required Books: [2] “The Intelligent Investor" by Benjamin Graham. Office Hours. please feel free to call or send me an email. send me an email and I will post it on the class site. You will need to print these out and bring them to class with you. Required Casebook: [1] go to http://create. Lecture Slides: Lecture slides will be posted in advance on the class web page. or The Economist.market place knows that Drexel takes honesty seriously. 2. 4    . Review Sessions: N/A 4. 4. Group sign-up can be completed at the following link: https://spreadsheets.

and Pitfalls Required Readings: None Week 6 Group Presentation #1 Group Presentation #2 Group Presentation #3 Topics: Quantitative Investment Strategies Required Readings: Empirical Finance Blog “Trading Paper Reviews” Week 7 Group Presentation #4 Group Presentation #5 5    . 4. 5.1 Detailed Outline: Below is a schedule with topics/agenda for the course. Course Outline 5. Required Readings: Case: Note: The Hedge Fund Industry Week 2 Topics: Hedge Fund Strategies. Guest Speaker Required Readings: Empirical Finance Blog “Trading Paper Reviews” Week 5 Topics: Backtesting Techniques.My goal is to respond to every question within 24 hours.4. Trading setup.3 Class Material: The class web site will be posted on Blackboard at http://drexel.edu. 4. Procedures. Required Readings: Case: Maverick Capital Week 3 Topics: Hedge Fund Operations. Teaching Assistant: John (Jack) Vogel. jrv34@drexel. Solutions to the problem set will be posted no later than one week after the due date. Required Readings: Best Practices for the Hedge Fund Industry.blackboard. More than one topic will typically be covered during a class session (bring coffee!). This is the central location where all teaching materials are posted. Class announcements will be posted here. they will not be distributed in paper form in class. Problem sets will be posted there as well. Principles and Best Practices for Hedge Fund Investors. Week 4 “The Little Book that Still Beats the Market” Professional Report due Topics: Basic Quantitative Strategies. Week 1 Topics: Hedge Fund Industry Overview. The TA will hold office hours in Academic Building 216 Wed 1230-1330.edu/.

Week 8 Group Presentation #6 Group Presentation #7 Topics: Activist Investing. Eight Lessons from Neuroeconomics for Money Managers. LLC Required Readings: Case: Opportunity Partners Week 9 Topics: Value investing strategies. Guest Speaker: Jim Johnson EnCap Partners Required Readings: Survey of Behavioral Finance.Topics: Behavioral Finance. Guest Speaker: Damien Park. Hedge Fund Solutions. Guest Speakers: Anthony Cambeiro and Keith Peter Required Readings: Seven Immutable Laws of Investing Week 10 “The Intelligent Investor” Professional Report due “Trading Performance” Professional Report due Strategy Presentations 1-4 Week 11 Strategy Presentations 5-8 6    .