16 Security Analysis and Portfolio Management

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how to analyse and manage a portfolio
    To be Filled By Accreditation Department   [< Faculty code >/< Dep. Code >/< Programme Code >/< Module Code >/< Change Track  >] Module Descriptor FM-EDU-003 Rev. 001 Page 1  of 3  15-07-2013 Module Name   Security Analysis and Portfolio Management Module Code   A7-SPM Version no.   01  Last Modified Date:   NA Level   7 Credits   20 Aim   The aim of this module is to provide underlying theories and tools for security analysis and portfolio management. Rationale   The module equips learners to understand and analyse various securities and thereby to create and manage a portfolio aimed at meeting the clients’ stated goals.At the completion of this module, learners will be able to effectively analyse varioussecurities and maintain a portfolio according to the clients’ investment policy statement (IPS).   Pre-Requisites   Business and Finance, Quantitative methods and Economics. Delivery Approach   Will be a combination of lectures, tutorials, online guided learning, case studies etc.   Notional Learning Hours   Guided Learning Hours   100 Independent Learning Hours   100 Learning Outcomes   A student who successfully completes this module should be able:    To explain the steps in portfolio management and the reasons for an investment policy statement;    Describe the investment objectives (return and risk) and the investment constraints (liquidity, time horizon, regulators, unique needs and tax constraints), that fall under the investment policy statement;    Identify the importance of asset allocation in terms of the percentage allocated to the different asset classes and how the political and economic factors result in different asset allocation decisions for investors in various countries;    State the assumptions of the Markowitz model in relation to investor behaviour;    Calculate and explain the Expected return, Standard Deviation, Variance, Covariance, Coefficient Correlation concerning an individual investment and a portfolio as a whole;    Understand the efficient frontier and the importance of an optimal portfolio;    Identify the importance of the market portfolio in the formation of the Capital Market Line (CML);    Learn Capital Asset Pricing Model (CAPM);    To understand Security Market Line (SML) for the proper valuation of securities;    Contrast systematic and unsystematic risk;    Specific Models like Risk and return optimization, Efficient frontier;    Efficient portfolios, Leveraged portfolios, Corner portfolios;    Portfolio evaluation measures like Sharpe’s Single Index model and Sharpe’s Performance Index.    To understand that behaviours and perceptions of investors is important in the market place. Assessment   Assessment Heading   Assessment Type   Contribution      To be Filled By Accreditation Department   [< Faculty code >/< Dep. Code >/< Programme Code >/< Module Code >/< Change Track  >] Module Descriptor FM-EDU-003 Rev. 001 Page 2  of 3  15-07-2013 Attendance Class Attendance Register 5% Internal Assessment >=1 Short Test, >=1 Assignment 10% Mid Assessment Written Examination 25% End Assessment Written Examination 60% Supplementary Assessment: will consist of an Examination and will be worth 100% of the total supplementary mark. Learning Resources Required reading: Reilly F. K. and Brown K. C., (2011), “Investment Analysis and Portfolio Management”. 10th Ed. South-Western College Pub; USA Reference Material: Bodie Z., Kane A., and Marcus A. J., (2009), “Investments”. 8th Ed. McGrawHill Irwin; USA Bodie Z., Kane A., and Marcus A. J., (2010), “Investments and Portfolio Management”, 9th Ed. McGraw-Hill ; USA Open Education Resources :, blackboard   Other Resources   Notebooks, Calculator, Web based and electronic resources Indicative Content      The asset allocation decision:    Individual investor life cycle    The portfolio management process    Investor policy statement    Portfolio management:    Risk aversion    Alternative measures of risk    Expected return, variance, standard deviation of an individual asset and portfolio.    Asset pricing models    Capital market theory    Capital asset pricing model    ã  Behavioural finance Meaning and objective of investment Meaning and objectives of security analysis Analysis and Measurement of various risks and return Determinants of required rate of return Risk free rate and Risk Premium Valuation of Equity and Debt instruments Portfolio Analysis  –  Selection and Evaluation Meaning of portfolio  –  Reasons to hold portfolio Diversification analysis  –  Ma rkowitz’s Model –  Assumptions Specific model  –  Risk and return optimization  –  Efficient frontier  –  Efficient portfolios  –  Leveraged portfolios  –  Corner portfolios  –   Sharpe’sSingle Index model –  Portfolio evaluation measures  –   Sharpe’s Performance Index  Behavioural finance.    To be Filled By Accreditation Department   [< Faculty code >/< Dep. Code >/< Programme Code >/< Module Code >/< Change Track  >] Module Descriptor FM-EDU-003 Rev. 001 Page 3  of 3  15-07-2013
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