LAHORE SCHOOL OF ECONOMICS

Investments (FNC-402)

Program BBA III Section A, B and D

Credit Hours 3 CHs

Duration 16 Weeks

Prerequisites Basic course of Statistics, Business Finance or Financial

Management

Resource Person Sadia Tabassam

Class timings

Office & Ext. H-2 , Room 6

Office Hours

E-mail Sadia.tabassam86@gmail.com

Teaching Assistant

Course: Investments
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 Lahore School of Economics
BBA III
Spring Term 2022

SYLLABUS

I. Financial Assets & Markets.

II. Primary & Secondary Markets.

III. Investment Risks & Returns.

IV. Fixed Income Securities: Valuation, Duration & Immunization.

V. Equities: Valuation, Analysis & Strategy.

VI. Efficient Market Hypothesis: Active and Passive Investment Management.

VII. Indirect Investing: Investment Companies & Mutual Funds.

VIII. Basics of Modern Portfolio Theory.

IX. Basics of Fundamental and Technical Analysis.

X. Basics of Derivatives.

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 Course Introduction

This course helps students to understand the strengths and weaknesses of the Efficient
Market Hypothesis. By the end of the course, each student should be able to form a
preliminary view of the extent to which he or she should use an active or a passive style in the
management of his or her own personal investments.
Students will learn the basic strategies and techniques of fundamental and technical analysis
of marketable securities as well as how financial markets are structured and key financial
instruments offered therein. In addition, the course will provide an introduction to Modern
Portfolio Theory and discuss how this theory impacts risk in relation to financial instruments
studied in this course.
The course perspective is that of a financial services provider, helping clients make
appropriate investment decisions in their personal lives.

Course Learning Objectives

The course has been designed to achieve the following objectives:

CLO 1. Emphasize the role of risk and return in investment decision making
CLO 2. Provide a good understanding of portfolio, diversification and other
investment theories
CLO 3. Provide students a working knowledge on the functioning of security
markets in general and specifically for Pakistan (Pakistan Stock Exchange)
CLO 4. Familiarize students with the key analysis done by rational investors
including technical and fundamental analysis
CLO 5. Urge students to be able to think logically and systematically
CLO 6. Decision making of buying and selling of stocks from PSX

Program Learning Objectives

PLO 1. To equip students with analytical skills that are necessary to work effectively
in business management;
PLO 2. To ensure the participants develop their leadership potential, including
communication skills, so that they can lead, motivate and evaluate employees at
every step of the management ladder;
PLO 3. To develop their decision-making skills, partly through the case method, and
generally through working on and analyzing data to reach conclusions;
PLO 4. To realize the importance of team-work by working in teams, managing
conflict, sharing joint responsibility and placing “we” before “I”;
PLO 5. To encourage them to gain deeper and broader knowledge of Pakistani
industry through group-based project and learning from other teams and projects;
PLO 6. To make participants aware of ethical issues in business and of their own
social responsibility towards society at large.

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Program Learning Objectives Course Learning Objectives Course Assessment Item
PLO 1. To equip BBA Emphasize the role of risk and CP, Quizzes, Assignments, and
participants with the return in investment decision Exam
managerial knowledge making (CLO 1)
and analytical skills that
are necessary to work Provide a good understanding of
effectively in business Portfolio, Diversification and
management; other investment theories (CLO
2)
PLO 2. To ensure the Explore an array of real time CP, Quizzes, Assignments,
participants develop investable financial assets with Presentations
their leadership students (CLO 3)
potential, including
communication skills, so
that they can lead,
motivate and evaluate
employees at every step
of the management
ladder;
PLO 3. To develop their Urge students to be able to think Cases, Quizzes
decision-making skills, logically and systematically (CLO
partly through the case 6)
method, and generally
through working on and
analyzing data to reach
conclusions;
PLO 4. To realize the Familiarize students with the key Group Trading Activity
importance of team- analysis done by rational
work by working in investors including technical as
teams, managing well as fundamental analysis
conflict, sharing joint (CLO 5)
responsibility and
placing “we” before “I”;
PLO 5. To encourage Explore an array of real time CP, Quizzes, Assignments, Exam
them to gain deeper and investable financial assets with and Group Trading Activity
broader knowledge of students (CLO 3)
Pakistani industry
through team-based Provide students a working
projects and through knowledge on the functioning of
learning from other security markets in general and
teams and projects; specifically for Pakistan
(Pakistan Stock Exchange) (CLO
4)
PLO 6. To make Not Addressed
participants aware of
ethical issues in business
and of their own social
responsibility towards
society at large.

| Investments (FNC-402) 4
 Pedagogy
Finance is by its very nature a content-dense subject. We will be covering a lot of material in a
very short time. I encourage you to discuss issues and collaborate on everything except
exams and quizzes since this will facilitate your learning and understanding of the material.
The teaching methodology includes lectures, case discussion sessions, in class assignments,
and group presentations. Students are required to read assigned material before coming to
class to develop better understanding of the lectures. The course is analytical in nature and
therefore active participation of students will be encouraged to facilitate the learning process.
The class participation would also contribute towards the final grade. Moreover, the students
are expected to adhere to the following when class is in session
a. Mobile/Cell Phones must be switched off or set to silent.
b. Any action which disturbs the class is prohibited.

Regularity and Punctuality:

Regularity and punctuality will be very strictly observed. You have an allowance of number of
absences as per LSE policy. This includes the leaves that are approved from your Students
Affairs Office. Regarding punctuality, you will be marked present only if you arrive in the class
within five minutes of the scheduled time. If your group is making a presentation and you are
not there, you get zero. If you miss a Quiz you get zero in that Quiz unless until approved from
instructor, no makeup quiz. No assignment will be accepted after the due date.

Book Readings:

You are supposed to have read the assigned text’s chapters under discussion in advance.
Questions answered, relating to these text chapters, will contribute to the class participation
marks.

Class Participation:

Positive, healthy and constructive class participation will be monitored for each class.
Particular emphasis will be given during the presentation and case study sessions. The
manner in which the question is asked or answered will also be noted. Your behaviour, as
business executives in the class will contribute to the class participation marks.

Policy on Plagiarism/Cheating:
The plagiarism in Assignment/presentation or cheating during exam will result in an F grade
for the course. The students must note that plagiarism include the submission/presentation
of a report/article that has been previously used for another course (even by the same
author) or using the graded material of this course for some other course.

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 Assessments

All of the activities held during the session will be evaluated. The final grades for the course
will be as follows:

Final exam 35%

Mid-term exam 20%
Attendance + CP 5%
Assignments & Quizzes 15%
Project 25%
Total 100%

Quizzes/Class Participation:

Quizzes will be taken randomly as per the judgment of instructor (surprised or announced).
The quizzes are aimed at evaluating the participants’ understanding and clarity of different
concepts. Some corrective action will be taken if necessary, to fill the gap between desired
and actual. Quizzes may be either subjective or objective.

Project:

Project is based on the evaluation of three types of portfolios by applying different techniques
and strategies discussed in this course. Each group is required to invest virtual money in
active, passive, and index portfolios for 10 weeks and then calculate rate of returns,
cumulative wealth, variance, standard deviation, covariance, beta, excess return through SML
of each portfolio. Then, rank each portfolio according to its performance. At the end of the
semester, a group of 5 to 6 students is supposed to submit an analysis report along with
supporting material.

Financial Calculator

 You MUST have a financial calculator with you in every class.

 Recommended financial calculator is (Texas Instruments BAII Plus:
http://education.ti.com/educationportal/sites/US/productDetail/us_baii_plus.html)
to get through the course. Many of the problems involve complex mathematical,
statistical and financial calculations. A financial calculator is necessary to solve them.
 Borrowing of calculator is strictly NOT ALLOWED during quizzes and Exams.
 You can access the video tutorials of BAII Plus on following URL
(http://www.atomiclearning.com/k12/en/ti_ba2)

RECOMMENDED TEXT BOOK:

C.P. Jones: Investments, Principles and Concepts, 12th edition

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 CALENDAR OF ACTIVITIES
Session
Modules Discussion Topics Class activities

 LECTURE 01
 What is an Investment
 Investment alternatives
 Product types
 Trade-off between risk and return
 Determinants of Required rates of Return
 LECTURE 02 Problem sets
 DIRECT INVESTMENT
Quiz
 NON MARKETABLE
Newspaper
 MONEY MARKET
 CAPITAL MARKET
articles related
THE
 DERIVATIVE MARKET to stock
INVESTMENT
 LECTURE 03 exchanges e.g.,
1-6 BACKGROUND
 Indirect Investment PSX and its
 Mutual Funds: closed end and open end mutual funds, different
NAV sectors
 LECTURE 04
 Primary & Secondary Markets; Underwriting&
Investment Banking
 LECTURE 05
 Market Indexes, Indexed Investing & ETFs
 LECTURE 06
 Trading practices: Brokerage transactions, types of orders,
margins, short selling
 LECTURE 07
 Why should capital markets be efficient?
 Measuring Return & Risk:
 Total return, return relative, cumulative wealth index,
arithmetic mean, geometric mean, variance, standard
deviation
 LECTURE 08
 Relationship between Risk and Return
 Risk Premium and Portfolio Theory
Collection of
 Risk Aversion, Definition of Risk
 Markowitz Portfolio Theory Daily Price of
 LECTURE 09, 10 allocated stocks
DEVELOPMENTS  Asset Pricing Models listed at PSX.
IN INVESTMENT  Capital Market Theory Calculation of
7-14
THEORY  Capital Asset Pricing Model (CAPM) Returns and
 Security Market Line (SML) Risk of stock
 Market Portfolio indices.
 LECTURE 11, 12
 Multi-factor Models of Risk and Return
 Arbitrage Pricing Theory (APT)
 Multifactor Models
 Fama-French three-factor Model
 Carhart four-factor Model
 Fama-French five-factor Model
 LECTURE 13,14
 Stock selection: Economy , Industry and Company
analysis
LECTURE 15
15 MID TERM MID TERM EXAMINATION

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 EXAM
 LECTURE 16,17
 Overview of the Valuation Process
 Theory of Valuation
 Valuation of Alternative Investments
 LECTURE 18, 19
 Industry Analysis
 Business Cycle and Industry Sectors
VALUATION  Industry Life Cycle
PRINCIPLES  Industry Competition
&  Industry Rates of Return
ANALYSIS AND  LECTURE 20, 21 Problem sets
 Stock Valuation: Zero growth, variable growth and
MANAGEMENT Quiz
16-23 constant growth models.
OF COMMON
 Stock Valuation: Earnings multiplier approaches.
STOCKS  LECTURE 22, 23
 Technical Analysis
 Underlying Assumptions
 Dow Theory
 Trends, reversals & market breadth
 Advantages and Challenges of Technical Analysis
 Technical Indicators
 Passive vs. Active Management
 Value vs. Growth Investing
 LECTURE 24, 25,26,27
 Analysis of Fixed Income Securities
ANALYSIS OF  Basic Features
 Valuation Principles Project
FIXED INCOME
24-29  Basics of Derivatives– Options, Futures, Forwards, Presentation
AND DERIVATIVE
Swaps, Warrants, Credit Default Swap (CDS),
INSTRUMENTS
Collateralized Debt Obligations (CDOs) etc.
 LECTURE 28,29
 Project Presentations in groups

LECTURE 30
30 FINAL TERM
FINAL TERM EXAMINATION
EXAM

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