Theory of financial asset valuation and selection. The valuation of financial securities. Portfolio management.
This paper introduces students to the principles of valuation of financial securities and their uses in a portfolio of assets. We look at equity (stock/shares), debt (fixed income/interest) and derivatives. We analyse asset pricing models and financial markets. Occasionally, ethical issues will be raised. This paper aims to set the foundations of future finance studies and is a prerequisite for further finance studies.
|Paper title||Investment Analysis and Portfolio Management|
|Points||18 points 18 points|
|Teaching period(s)||First Semester, Second Semester|
|Domestic Tuition Fees (NZD)||$846.30|
|International Tuition Fees (NZD)||$4,073.10|
- (BSNS 102 or BSNS 112) and (BSNS 108 or BSNS 114) (each passed with a grade of at least C+) and (FINC 102 or FINQ 102)
- Schedule C
- MATH170 will be accepted as an alternative to FINC 102 or FINQ 102 when that paper has already been passed or where a student is enrolled for both a BCom and another degree for which MATH 170 is required.
- Teaching staff
- Paper Structure
- The paper is purposefully designed to expose the student to a large range of challenging core financial concepts. The class has a significant increase in difficulty compared to 100-level papers, and thus only students with a genuine interest in finance should enrol. Nearly 50% of the learning will be independent, and the majority of assessments will be mostly problem based in nature - underlying theory and mathematics is your responsibility to learn.
- Teaching Arrangements
- Lectures and tutorials.
Recommended: Bodie, Z., Kane, A. and Marcus, A. (2019). Essentials of Investments, 11th edition. N.Y. : McGraw-Hill Irwin.
- Course outline
- Graduate Attributes Emphasised
- Communication, Critical thinking, Information literacy, Self-motivation.
View more information about Otago's graduate attributes.
- Learning Outcomes
- Basic understanding of securitisation, products and trading platforms
- Distinguish between a price-weighted and value-weighted index
- Calculate the level and returns of value and price-weighted indices
- Discuss the three forms of market efficiency and their implications
- Explain why it is important to have efficient markets
- Derive the efficient frontier for the two-asset case
- Explain how having a riskless asset affects portfolio choice
- Derive the minimum variance set when all assets are risky
- Understand the efficient frontier with multiple risky and one riskless asset
- Derive and understand the implications of CAPM and the Capital Market Line
- Compute the expected return on a security using CAPM
- Determine if a security is over- or under-priced using CAPM
- Understand the relevance of macroeconomic indicators and how these factors affect equity valuation
- Understand and use the dividend discount model for pricing equities
- Understand ways of estimating growth rate and terminal value
- Dividend valuation model with investment opportunities
- Price to earnings ratio in equity valuation
- Compute the price of a bond and yield
- Compute forward rates given the current spot rates
- Calculate duration of a bond
- Explain how duration measures interest rate risk
- Differentiate convexity from duration
- Introduction to derivatives and payoff diagrams