25503 Investment Analysis

Subject level: Undergraduate

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

Assessment item 1: Case Study (Group)

Assessment item 2: Mid-Semester Examination (Individual)

Assessment item 3: Final Examination (Individual)

Required text(s)

Robert A. Haugen, Modern Investment Theory, 5th edn, Prentice Hall, 2001

Recommended text(s)

E. Elton, M. Gruber, S. J. Brown and W. N. Goetzmann, Modern Portfolio Theory

and Investment Analysis, 7th edn

David. G. Luenberger, Investment Science, Oxford University Press, 1998 edn, John Wiley and Sons, 2007

Indicative references

Lecture slides are available for purchase at the following locations:

• UTS Union Shop, level 3, Tower Building, Broadway
• UTS Union Shop, Union Centre, level 1, Building 5, Haymarket.

The slides cost $13.00, and are indentified by the following number: CN 3577. They will also be posted on UTSOnline.

Useful websites