Faculty of Business: Finance and Economics
Credit points: 6 cp

Subject level: Undergraduate

Result Type: Grade and marks

Requisite(s): 25556 The Financial System AND ((35151 Introduction to Statistics AND 35102 Introduction to Analysis and Multivariable Calculus) OR 25622 Quantitative Business Analysis)
These requisites may not apply to students in certain courses.
There are also course requisites for this subject. See access conditions.

Handbook description

This subject introduces the conceptual and theoretical framework of the portfolio approach to investments. It applies the techniques of mean variance diversification to investment management and reviews asset pricing models and their application to investment management. Other topics are bond portfolio management and use of derivatives in an investment portfolio.

Subject objectives/outcomes

On successful completion of this subject, students should be able to:

1. Understand the role of risk and return in asset allocation process
2. Appreciate theories relating to asset pricing and portfolio choice
3. Evaluate risky asset classes and their derivatives in investment analysis
4. Recognise problems and issues in investment management.

Contribution to graduate profile

Investment Analysis introduces the theory and practice of asset selection under uncertainty. Asset selection and risk management techniques are considered and applied in investment management. Principal asset classes (equity, fixed interest securities and derivatives) will be analysed in the context of their contribution to portfolio objectives, risk and return. Portfolio performance is monitored to illustrate the problems and issues in investment management.

Teaching and learning strategies

The course incorporates a range of teaching and learning strategies. Concepts covered in lectures will be reinforced with workshop questions and assignments. Printed materials supplemented by electronic resources will support flexible learning. Computer-based assignments are designed to illustrate the application of the concepts covered in investment analysis and portfolio management.

Content

• Risk and return: single security and portfolio of assets
• Introduction to portfolio theory, asset pricing theories and market efficiency
• Using asset pricing models: single index model, capital asset pricing model, arbitrage pricing theory
• Valuation of equity: models based on dividends, earnings capitalisation and free cash flow; fundamental and technical analysis
• Active and passive strategies, performance measurement
• Bond portfolio management, risk management, immunisation, duration and yield curve
• Futures and options in portfolio risk management.

Assessment

Case Study (Group)	30%
The case study enables students to demonstrate their understanding of how theories and concepts associated with portfolio management can be applied. It assures objectives 1-4.
Mid-Semester Examination (Individual)	20%
In the mid semester examination, students will be tested for their understanding of concepts of security risk and return, measurement of portfolio risk and return and the applications of asset pricing models. It assures objectives 1 and 2.
Final Examination (Individual)	50%
The final examination will test students' appreciation of issues in asset allocation under uncertainty. They are required to show an understanding of the problems in constructing portfolio of assests and demonstrate proficiency in evaluating portfolio perfromance. It assures objectives 1-4.

Examinations will be conducted under University examination conditions, and hence thoroughly address concerns regarding secure assessment. The case study will be secured through a combination of updating of assessment tasks across semesters and/or plagiarism detection software.

Recommended text(s)

Brailsford, T. and Heaney, R. (2004) Investments: Concepts and Applications in Australia, 2nd ed. Thomson/South-Western, Australia.

Indicative references

Jones, C.P., Gilroy, N., Shamsuddin. A, and Simpson, K. (2003) Investments: Analysis and Management, John Wiley and Sons, Australia.

Gitman, L.J., Joehnk M.D., Juchau, R.H., Wheldon, B.J. and Wright, S.J. (2004) Fundamentals of Investing, 2nd ed. Pearson/Addison-Wesley, Australia.