F3710spring 21outline PTRA (1) PDF

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Baruch College The Zicklin School of Business The Bert Wasserman Department of Economics and Finance Finance 3710 /PTRA- Investment Analysis; Spring 2021 Prof. Theodor. H. Eytan

Office: Room 10-267, Vertical Campus Phone: (646) 312-3477 Office Hours: Via Zoom. Email me for appointment. Email: [email protected]

Course Description This course introduces students to the fundamental principles and theories of financial asset pricing and valuation. It provides students with a rigorous analysis of modern portfolio theory, Capital assets pricing models, and the valuation of common stocks and bonds. It includes an introduction to the main financial markets, their organization and functional characteristics.

Course Learning Goals Assets classes, financial instruments and markets

Students will understand the economic role of financial markets and know the major assets classes characteristics. Students will understand the construction of various stock market indexes. Students will understand how securities are issued, traded and the details of buying on margin and short-selling. Students will understand the reasons for underpricing of IPOs and the empirical evidence.

Mutual funds and other investment companies

Students will learn the distinguishing characteristics of the various kinds of mutual funds, unit investment trusts, hedge funds and exchange traded funds. Students will be able to analyze mutual funds in view of their specific fees and costs structure.

Risk, return and capital assets pricing and arbitrage

Students will learn to compute different measures of multi-period return. Students will understand risk aversion, expect utility maximization and Value at Risk as guides for portfolio optimization. Students will gain thorough knowledge of the traditional Capital Assets pricing model. In addition, they will learn the Fama -- French 3 factor model and arbitrage pricing theory. Students will learn to use regression analysis to identify systematic risk, mispricing, and how to create market neutral portfolios or arbitrage portfolios.

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Markets efficiency, behavioral Finance and technical analysis

Students will learn about the theoretical underpinning of the efficient markets hypothesis (EMH), the empirical evidence and the implication for investment decisions. Students will learn about the behavioral finance approach and contrast it with the EMH in terms of investment decisions. Students will learn about the logic of technical analysis and some of its tools.

Options markets and options strategies

Students will learn about the various kinds plain vanilla and exotic options available. Students will learn to draw payoff and profit diagram for various option strategies. Students will be able to articulate the circumstance under which various strategies are beneficial

Bonds and the term structure of interest rates

Students will be able to evaluate straight bond and also understand the role option structure role of callable and convertible bonds. Students will learn to extract the yield curve and the term structure of interest rates from the prices of zero-coupon bond. Students will lean about real interest rates and inflation and be able to assess market expectations about inflation from the term-structure.

Macroeconomics, industry analysis and security valuation

Students will learn constant growth model and its variants and understand the Price Earnings ratio relationship to growth, and its role as a measure of interest rate risk for stocks. Students will learn about macroeconomic and industry analysis as part of security analysis and valuation and will be able to relate it to current market conditions and price behavior.

BBA Program-Level Learning Goals Analytical Skills

Students will possess the analytical and critical thinking skills to evaluate issues faced in business and professional careers.

Technological Skills

Students will possess the necessary technological skills to analyze problems, develop solutions and convey information.

Communication Skills: Oral

Students will have the necessary oral communication skills to convey ideas and information effectively and persuasively.

Communication Skills: Written

Civic Awareness and Ethical DecisionMaking

Students will have the necessary written communication skills to convey ideas and information effectively and persuasively. Students will have the knowledge base and analytical skill to guide them when faced with ethical dilemmas in business. Students will have an awareness of political, civic and public policy issues affecting business.

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Global Awareness Proficiency in a single discipline: Advertising Account Planning

Students will know how differences in perspectives and cultures affect business practices around the world. Students will understand the role that account planning plays in the development and execution of an advertising campaign

Course Format and Teaching Method The course combines lectures with class discussions, and questions and answers routines. We will also have weekly assignments. Not everything you will be tested on will be discussed in class. Expect to learn some materials on your own. Self-learning is a skill for life! The structure and my philosophy of teaching is related to the following quotes. I hear, and I forget… I see and I remember… I write & I remember more… I do and I understand even more…(Anonymous) Teachers open the door, but you must enter by yourself! (Chinese proverb) “I cannot teach anybody anything, I can only make them think.” (Socrates) Spoon feeding in the long run teaches us nothing but the shape of the spoon. -E. M. Forster

Course Materials Website

Baruch College utilizes Blackboard platform for delivery of online content. Go to CUNY Portal, log in, click on Blackboard, then find your course.

Textbook

Essentials of Investments, Author: Bodie, Kane, Marcus, Publisher: McGraw Hill, Edition: 11, Year Published: 2019

Additional readings

Downloadable from Blackboard. These will include Teaching Notes, and practice 3

questions. Connect

We will be using McGraw-Hill’s Connect platform for homework management. Connect will also provide you with an online version of the textbook. Sign-up to connect for this class ht t ps : / / connect . mheducat i on. com/ cl ass / t eyt anpt r w550715

Calculator and Computer

In class and on the midterm exam, you should have a financial calculator that can handle time value of money calculations with uneven cash flows is required, e.g., Texas Instruments BA II Plus Professional. Only financial calculators are allowed on exams. You must also have a computer with a video camera.

Grading Policy Your course grade will be calculated as follows: Base calculation Homework: 25% Midterm 1 15% Midterm 2 15% Final Exam 45% Adjustments The base calculation will be adjusted downward to reflect poor attendance (see attendance policy) The weighted average leads to a letter grade according to standard Baruch scale. This letter grade may be adjusted upward by as much as half a letter if you had strong and consistent class participation (I have to remember you as a strong participant.) Concerns about a D grade: If during the final exam you become concerned about receiving a D, and would prefer to get an F and retake the class, you should submit an empty Scantron or otherwise an empty test. If you submit answers and get a D, it will not be converted to F later on. If you skip the final altogether, you will also get an F in the course. All The grades are final and will not be changed unless there was an error by the instructor. Exam grades: The Department of Economics and Finance recommends that the median grade in this class will be ‘B’. I do not “curve” test results. However, if the class performs in a reasonable range, the scores are designed to result in a class average of 79 to 83 depending on the class performance. To illustrate, if in 30 questions test the class performance is on average 20 correct answers, and I determine the average to be 80 points, then each correct answer is worth 4 points. A person scoring 26 correct answers will then earn 104 points which will be fully accounted for in calculating the final grade.

Make-up Exams Policy o o

There are no makeups for midterms. If you miss a midterm for a valid (being busy with your job is not acceptable) and documented reason, the weight of the test will be added to the weight of the final exam. Without a valid reason you will get a zero on the test. The Instructor is the only judge of the validity of your reason for missing the test. 4

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If you miss the final exam for a valid documented reason and you have passing grades on midterms and homework you will receive an INC grade and will be allowed to take the make-up test at a time agreed upon with the instructor. This exam may be graded differently than the class exam and will reflect the fact that you had more time to study. If you miss the final exam without a valid reason you will get a zero for the final. All the documentation pertaining to missed exams should be provided to the instructor no later than 2 days after the final exam date.

Attendance and Lateness Policy (COVID -19 version) WILL NOT BE ENFORCED You may miss 3 classes without penalty. Your attendance will be monitored and missing more than 3 classes will affect your participation grade. A student is considered in attendance if s/he are not late more than 15 minutes, and did not leave the classroom before the last 15 minutes of the class. I may call on you to verify that you are in. Your attendance is recorded by Zoom. In addition, I may occasionally call on you to verify your presence. If you must leave before the last 15 minutes of the class (i.e., before 5:10 p.m.) ask for permission in advance by email. For special circumstances, such as religious holidays, sickness etc… -- email me.

Exams policy o o o

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No cell-phone or other electronic device are allowed Only one financial calculator that cannot store text is allowed. On the final exam, you will be allowed one page of notes, standard size and double sided. It may be typed. It cannot include answers to questions or solutions to problems. It may only include formulae and definitions. Your name should be on this page which must be submitted with your test. All the exams are multiple choice questions. You may not leave the room during the exam Exams will be proctored remotely.

Classroom Policy o o o

Asking clarifying questions is considered as class participation if it is not a waste of class time. If you have a question which is not of interest to the rest of the class, ask after the class ends. Classes are online via Zoom. Most of the classes will be recorded and available on Blackboard. Students who participate in this class with their camera on or use a profile image are agreeing to have their video or image recorded solely for the purpose of creating a record for students enrolled in the class to refer to, including those enrolled students 5

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who are unable to attend live. If you are unwilling to consent to have your profile or video image recorded, be sure to keep your camera off and do not use a profile image. Likewise, students who un-mute during class and participate orally are agreeing to have their voices recorded. If you are not willing to consent to have your voice recorded during class, you will need to keep your mute button activated and communicate exclusively using the "chat" feature, which allows students to type questions and comments live. I would prefer that you participate with your camera on and unmuted as it makes the sessions more like real classroom sessions, but you are not required to do so.

General Conduct You are expected to act in a ‘business-like’ manner. That includes, among other things, solving problems/academic issues in a timely manner and refraining from making excuses.

Tentative Schedule of topics Date 2/2 -- 9

2/11 -- 16 2/18 – 3/4

3/9

Topic Introduction, background and issues. Assets classes and financial instruments. Securities markets Mutual Funds and other investments companies Review of probability concepts; risk and return; Fisher’s equation; Efficient diversification; Review for Test 1 Test 1 (65 minutes, closed book, chapters 1 –6)

Read chapter 1, 2, 3

4 5, 6

3/12 -- 25; 4/6 -- 8 4/13 -- 15 4/20 4/22 4/27 -- 29 5/4 -- 6

The Capital Assets Pricing Model (CAPM), 7 Arbitrage Pricing Theory and index/factor models. The Efficient Markets Hypothesis (EMH) 8 Test 2 (65 minutes, closed book, chapters 6 – 8) Behavioral Finance; Technical analysis 9 Options Markets and options strategies 15 Bond prices and yields; The term-structure of Ch. 10 interest rates. 5/11 – 4513 Macroeconomic and industry analysis, equity 12, 13, (specific parts to be valuation models, announced.) Review for the Final Exam (optional extra session to be announced.)  Spring break is 3/27 – 4/4/2021 * The last day to drop the course with a W grade is 5/17/21

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Academic Integrity The Department of Economics and Finance fully supports Baruch College's policy on Academic Honesty, which states, in part: Academic dishonesty is unacceptable and will not be tolerated. Cheating, forgery, plagiarism and collusion in dishonest acts undermine the college's educational mission and the students' personal and intellectual growth. Baruch students are expected to bear individual responsibility for their work and to uphold the ideal of academic integrity. Any student who attempts to compromise or devalue the academic process will be sanctioned. Additional information can be found at https://www.baruch.cuny.edu/academic/academic_honesty.html. Any infringement of this rule will be treated as a serious violation of Academic Integrity. Any suspected academic dishonesty in this regard will result in a grade of F on the exams and most likely an F in the course as well. Students should also understand that a report of suspected academic dishonesty will be sent to the Dean of Students’ office and becomes a permanent part of the student’s file.

Students with Disabilities and Other Special Needs Students with disabilities are supported in their academic studies by Baruch College’s Office of Services for Students with Disabilities according to their Mission Statement: The Office of Services for Students with Disabilities exists to provide reasonable accommodations to students with disabilities to ensure they have equal access to the college’s programs and services. Through student intake, faculty consultation, and outreach to the community, students can develop interpersonal, social, vocational and emotional growth. Students who feel that they may need a reasonable accommodation based on a disability should contact the staff at the Office of Services for Students with Disabilities

Assurance of Learning BBA Common Educational Learning Goals Analytical skills Technological skills Communication skills: Oral Communication skills: Written Civic awareness and ethical decision-making Global awareness

Significant Part of Course X

Moderate Part of Course

Minimal Part of Course

Not Part of Course

X X X

x X

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Proficiency in a single discipline

X

Assignment Mapping Assignments

Course Learning Goals

BBA Learning Goals

Participation

All

Analytical skills, Proficiency in a single discipline Communication skill: Oral Global awareness

Exams

All

Analytical skills Proficiency in a single discipline

Connect Assignments

All

Analytical Skills Proficiency in a single discipline Technological skills Global awareness

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