Financial Investments: Module I, Portfolio Theory; Module Ii, Portfolio Management
A.Y. 2024/2025
Learning objectives
Instructional objectives that students are expected to achieve (first module - PORTFOLIO THEORY):
Equilibrium in capital markets, portfolio theory and practice: to understand theory and empirical evidence behind optimal risky portfolios; capital asset pricing models; arbitrage pricing models, single-index and multifactor models of risk and return.
The efficient market hypothesis, and the behavioral finance: to understand theory and empirical evidence behind well-functioning markets, irrational behaviors and bubbles.
Instructional objectives that students are expected to achieve (second module - PORTFOLIO MANAGEMENT):
Risk management in the context of fixed-income securities: to understand bond prices and yields, the term structure of interest rates, managing bond portfolios.
Risk management in the context of stock securities: to understand macroeconomic and industry analysis, equity valuation models, financial statement analysis.
Risk management in the context of derivatives: to understand the trading mechanics of option and futures contracts and their pricing.
Portfolio performance evaluation: to understand the reasons for the use of risk-adjusted indicators, to calculate and use them.
Equilibrium in capital markets, portfolio theory and practice: to understand theory and empirical evidence behind optimal risky portfolios; capital asset pricing models; arbitrage pricing models, single-index and multifactor models of risk and return.
The efficient market hypothesis, and the behavioral finance: to understand theory and empirical evidence behind well-functioning markets, irrational behaviors and bubbles.
Instructional objectives that students are expected to achieve (second module - PORTFOLIO MANAGEMENT):
Risk management in the context of fixed-income securities: to understand bond prices and yields, the term structure of interest rates, managing bond portfolios.
Risk management in the context of stock securities: to understand macroeconomic and industry analysis, equity valuation models, financial statement analysis.
Risk management in the context of derivatives: to understand the trading mechanics of option and futures contracts and their pricing.
Portfolio performance evaluation: to understand the reasons for the use of risk-adjusted indicators, to calculate and use them.
Expected learning outcomes
Instructional objectives that students are expected to achieve (first module - PORTFOLIO THEORY):
Equilibrium in capital markets, portfolio theory and practice: to understand theory and empirical evidence behind optimal risky portfolios; capital asset pricing models; arbitrage pricing models, single-index and multifactor models of risk and return.
The efficient market hypothesis, and the behavioral finance: to understand theory and empirical evidence behind well-functioning markets, irrational behaviors and bubbles.
Instructional objectives that students are expected to achieve (second module - PORTFOLIO MANAGEMENT):
Risk management in the context of fixed-income securities: to understand bond prices and yields, the term structure of interest rates, managing bond portfolios.
Risk management in the context of stock securities: to understand macroeconomic and industry analysis, equity valuation models, financial statement analysis.
Risk management in the context of derivatives: to understand the trading mechanics of option and futures contracts and their pricing.
Portfolio performance evaluation: to understand the reasons for the use of risk-adjusted indicators, to calculate and use them.
Equilibrium in capital markets, portfolio theory and practice: to understand theory and empirical evidence behind optimal risky portfolios; capital asset pricing models; arbitrage pricing models, single-index and multifactor models of risk and return.
The efficient market hypothesis, and the behavioral finance: to understand theory and empirical evidence behind well-functioning markets, irrational behaviors and bubbles.
Instructional objectives that students are expected to achieve (second module - PORTFOLIO MANAGEMENT):
Risk management in the context of fixed-income securities: to understand bond prices and yields, the term structure of interest rates, managing bond portfolios.
Risk management in the context of stock securities: to understand macroeconomic and industry analysis, equity valuation models, financial statement analysis.
Risk management in the context of derivatives: to understand the trading mechanics of option and futures contracts and their pricing.
Portfolio performance evaluation: to understand the reasons for the use of risk-adjusted indicators, to calculate and use them.
Lesson period: First trimester
Assessment methods: Esame
Assessment result: voto verbalizzato in trentesimi
Single course
This course can be attended as a single course.
Course syllabus and organization
Single session
Responsible
Lesson period
First trimester
Prerequisites for admission
Basic knowledge of economic concepts, mathematics, and finance is assumed. The lecturer will provide additional material to help the students to familiarize themselves with basic financial terminology and concepts if needed.
Assessment methods and Criteria
Teaching and learning methods include lectures, in-class experiments, short videos, numerical exercises, case studies, class discussion of relevant academic papers, and use of a student response system for comments and questions. All classes will follow an iterative approach. Students will have the opportunity to undertake a team project with the aim to build an investment strategy. The final exam will consists of open questions and numerical exercises.
Module I, Portfolio Theory
Course syllabus
This course provides an introduction to modern finance theory and its applications. It will start by giving a short preamble of asset classes and financial markets, security analysis. The course will then focus on fundamental analysis and equity evaluation, portfolio theory, asset allocation, and portfolio selection. The equilibrium in capital markets will be examined for CAPM and alternative pricing models such as the APT and multi-factor model. The course will also briefly explore the assumptions of investor rationality, investor irrationality, and their impact on investment decision making.
Objectives:
The course aims to provide students with an in-depth understanding of:
- an introduction on investment environment; assets classes and financial instruments; on how securities are traded; mutual funds and other investments companies;
- portfolio theory and practice;
- equilibrium in capital markets;
- Behavioural Finance theory.
Having successfully completed this module, students will be able to demonstrate knowledge and understanding of:
- the theoretical setup of the risk and return of a financial investment relationship and how this may be used to price financial assets;
- the theoretical underpinning of asset allocation and portfolio management;
- the supportive evidence and challenges to market efficiency;
- main cognitive biases (e.g. mental accounting), emotional biases (e.g. pride and regret); and social biases (e.g. herding).
Objectives:
The course aims to provide students with an in-depth understanding of:
- an introduction on investment environment; assets classes and financial instruments; on how securities are traded; mutual funds and other investments companies;
- portfolio theory and practice;
- equilibrium in capital markets;
- Behavioural Finance theory.
Having successfully completed this module, students will be able to demonstrate knowledge and understanding of:
- the theoretical setup of the risk and return of a financial investment relationship and how this may be used to price financial assets;
- the theoretical underpinning of asset allocation and portfolio management;
- the supportive evidence and challenges to market efficiency;
- main cognitive biases (e.g. mental accounting), emotional biases (e.g. pride and regret); and social biases (e.g. herding).
Teaching methods
Teaching and learning methods include lectures, in-class experiments, short videos, numerical exercises, case studies, class discussion of relevant academic papers, and use of a student response system (Kahoot or Vevox) for comments and questions. All classes will follow an iterative approach.
Teaching Resources
Reading list
- Bodie, Z., Kane, A., Marcus, A. J., 2011. Investments and Portfolio Management. McGraw Hill.
- Elton, E. J., Gruber, M. J., Brown, S. J., Goetzmann, W. J. 2011. Modern Portfolio Theory and Investment Analysis, Eighth Edition. Chapter 4-8, 16-17
- Barberis, N. and R. Thaler (2003) Chapter 18 A survey of behavioral finance. Handbook of the Economics of Finance, Volume 1, Part B, 2003, Pages 1053-1128
- Further journal articles as recommended.
- Bodie, Z., Kane, A., Marcus, A. J., 2011. Investments and Portfolio Management. McGraw Hill.
- Elton, E. J., Gruber, M. J., Brown, S. J., Goetzmann, W. J. 2011. Modern Portfolio Theory and Investment Analysis, Eighth Edition. Chapter 4-8, 16-17
- Barberis, N. and R. Thaler (2003) Chapter 18 A survey of behavioral finance. Handbook of the Economics of Finance, Volume 1, Part B, 2003, Pages 1053-1128
- Further journal articles as recommended.
Module II, Portfolio Management
Course syllabus
The second part of the course focuses on portfolio management and covers fixed-income securities and bond pricing, term structure relationships, interest-rate risk management, equity valuation using fundamental analysis, derivatives, evaluation of portfolio performance and an overview of active portfolio management.
Instructional objectives that students are expected to achieve:
· Fixed-income securities: to understand bond prices and yields, the term structure of interest rates, managing bond portfolios.
· Equity valuation: to understand macroeconomic and industry analysis, equity valuation models, financial statement analysis.
· Derivatives: to have an overview of existing derivatives and their risk management applications.
· Portfolio performance evaluation: to understand the reasons for the use of risk-adjusted indicators, to calculate and use them.
Instructional objectives that students are expected to achieve:
· Fixed-income securities: to understand bond prices and yields, the term structure of interest rates, managing bond portfolios.
· Equity valuation: to understand macroeconomic and industry analysis, equity valuation models, financial statement analysis.
· Derivatives: to have an overview of existing derivatives and their risk management applications.
· Portfolio performance evaluation: to understand the reasons for the use of risk-adjusted indicators, to calculate and use them.
Teaching methods
The course will be taught through lectures and assignments.
60-minute written exam. Students will have the opportunity to undertake a team project with the aim to analyse empirical literature and to simulate fundamental analysis.
60-minute written exam. Students will have the opportunity to undertake a team project with the aim to analyse empirical literature and to simulate fundamental analysis.
Teaching Resources
Book
Bodie, Kane, Marcus (2014), Investments, McGraw Hill, 11th Global Edition, Chapters 14-20, 24-26.
Bodie, Kane, Marcus (2014), Investments, McGraw Hill, 11th Global Edition, Chapters 14-20, 24-26.
Module I, Portfolio Theory
SECS-P/11 - FINANCIAL MARKETS AND INSTITUTIONS - University credits: 6
Lessons: 40 hours
Professor:
Degl'Innocenti Marta
Module II, Portfolio Management
SECS-P/09 - CORPORATE FINANCE - University credits: 6
Lessons: 40 hours
Professor:
Vandone Daniela
Educational website(s)
Professor(s)
Reception:
On appointment