COURSE OUTLINE

COURSE: SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

BATCH: IIM UDAIPUR MBA 2018-2020
HOURS: 30
INSTRUCTOR Uday Damodaran

1.0 COURSE OBJECTIVES

This course prepares you for careers in investment research and fund management. The
analysis of investments and the subsequent construction of portfolios to meet given
investment objectives is an exciting, and at the same time difficult, task. It is difficult
because a multitude of factors, many of them hazy and difficult to analyze and predict,
influence the performance of investment portfolios. For the very same reason it is
exciting also.

Investment management demands good analytical skills to understand and analyse

political, macroeconomic, industry -specific and firm-specific factors. It also requires a
very good understanding of the behaviour of security markets, a great deal of discipline
and a certain amount of luck.

Security analysis is as much an art as it is a science. So this course is structured with the
objective of (1) not only providing you with a strong theoretical foundation but also of
(2) encouraging you to work with investment data and discover aspects of investment
management on your own. The onus is therefore on you, to learn.

It might also be appropriate, here, to reproduce the first two paragraphs from the book
"Security Analysis and Portfolio Management" by Donald E. Fischer and Ronald J.
Jordon:

‘This book is about investing in securities. Unfortunately, however, we cannot provide

the toll for the easy road to riches. Security analysis and portfolio management are hard
work, requiring discipline and patience, and the work is not always rewarded by
exceptional returns.

None can deny that handsome returns have been reaped in the market by a variety of
methods ranging from sheer genius to the occult. The unfortunate thing about most of
these techniques is that they are difficult to duplicate consistently by everyone. Often it
just cannot be verbalized in a way that permits systematizing.’
2.0 SESSION PLAN

The course consists of 30 classroom hours (20 Sessions of 90 minutes each)

Session Topic Ref.

MODULE I: The Setting

1 Financial Systems, Trading Places and Products Ch1,2

Case: Role of Capital Market Intermediaries in the Dot-Com
Crash of 2000
Reading: Deloitte 2019 Investment Management Outlook

2 Trading, Clearing, and Settlement Systems Ch 3

3 The Profession & Roles: Analysts/ Researchers, Fund Managers, Ch 4

Traders and Differing Philosophies
Case: The Risk-Reward Framework at Morgan Stanley Research

MODULE II: Investor Objectives, Portfolio Theory and the Passive

Investor

4 Risk, return and utility functions, Risk-Aversion, Prospect Theory Ch 5

5 Markowitz Mean-Variance and the Capital Market Line Ch 6,7

6 The Single Index Model, CAPM and Multi-Factor Models Ch 8,9,10,13

7 Passive Investing
Case: Fidelity: Embracing ETFs
Guest Speaker: Index Investing

MODULE III: Security Analysis and the Passive Investor

8 Country/ Industry Analysis Ch 17

Country/ Industry Value & Risk Drivers, Sector Rotation,
Valuation, Implied Growth & Risk Premium

9 Identifying Equity Value Drivers Ch 19

10 Absolute Valuation Approaches & Styles Ch 19

DCF Valuation, Value Investing, Growth Investing,
Expectations Investing

11 Relative Valuation & Styles Ch 18

 Justifiable Relative Valuation Ratios, Implied Fundamentals
12 Guest Speaker: The Active Investor, Seeking Value

13,14 Behavioral Finance, and Investing Ch 12

15 Performance Evaluation Ch 24

16 Hedge Funds, Active Portfolio Management Ch 26, 27

MODULE IV: Fixed Income Analytics

17 Yields and Yield Curve Strategies Ch 14, 15

18 Duration and Convexity Based Strategies Ch 16

19,20 Guest Speakers: Global Investing, Family Offices

3.0 EVALUATION

Assignments 25%
Quizzes (2) 25%
Mid Term 25%
End Term 25%

The assignments give the students an opportunity to work with real life data and to put to
test popular theories and views. There will be two announced quizzes, a mid-term
examination and an end of term examination.

4.0 REFERENCES

Basic Text:
The basic text for the course is:“Investments” by Bodie, Kane, Marcus & Mohanty, TMH

Other References:

Portfolio Theory
“Modern Portfolio Theory and Investments Analysis” Elton, Gruber, Brown, Goetzmann
Fixed Income
“Fixed Income Markets and Their Derivatives” Suresh Sundaresan
“Bond Markets, Analysis and Strategies: Frank J Fabozzi
“Fixed Income Markets: Tools for Today’s Markets” Bruce Tuckman
Equities
“Investments”: William Sharpe
“Security Analysis and Portfolio Management” Fischer and Jordan
“Financial Statement Analysis and Security Valuation” Stephen Penman
“Expectations Investing: Reading Stock Prices for Better Returns” Rappaport and
Mauboussin
Investment Biases
“Beyond Greed and Fear” Hersh Shefrin