INDIAN INSTITUTE OF MANAGEMENT JAMMU

Master of Business Administration

Investment Analysis & Portfolio Management (IAPM)

Term -IV
Course Rationale:
The purpose of this course is to provide an in depth understanding of theory and practice related to
equity markets and portfolio management. The major topics include portfolio theory, asset pricing
models, market efficiency, fundamental and technical analysis, portfolio management, and fund
performance evaluation. We will discuss various theories about equity securities and examine their
practical implications for investment management of individuals and institutions.
The students, in this course, will be equipped with tools for determining investment objectives,
combining individual assets into portfolios, managing the portfolio, mitigating risks through derivatives
and finally, measuring the portfolio performance.
Those who are interested in fund management in asset management companies or in financial
institutions will find this course useful.
Course Objectives:
The course aims to:
1 Provide an in-depth understanding of theory and practice related to equity markets and portfolio
management;
2 Equip participants with tools required for determining investment objectives, combining
individual assets into portfolios, managing the portfolio, mitigating risks through derivatives
and finally, measuring the portfolio performance;
3 Provide necessary inputs for fund management in asset management companies or in financial
institutions.
Learning Outcomes:
Upon successful completion of the course, participants would be able to:
1 Understand the Modern Portfolio theory
2 Combine individual assets into portfolios and manage the portfolio – apply both active and
passive management strategies
3 Measure portfolio performance
4 Apply the principles and test efficient market hypothesis using event study methodology
5 Apply fundamental analysis and technical analysis
Prerequisite(s):
• Corporate Finance
• Skills to work with spreadsheets
Pedagogy:
• The pedagogy will be a mix of Lectures, presentations, Class Room Discussion and
Projects/Assignments.
Textbook:
• Investments, 11e, Bodie, Kane, Marcus and Mohanty [BKMM], McGraw-Hill
•
 Reference Books:
• Analysis of Investments and Management of Portfolios, 10e, Reilly, Frank, K., Brown,
Keith, C., [RB],Cengage, 2012
• Modern Portfolio Theory and Investment Analysis, 9e, Elton, Edwin J., Gruber, Martin J.,
Brown, Stephen J., and Goetzmann, William, N. [EGBG], Wiley, Jan 2014
• Investment Analysis and Portfolio Management, 3e, Prasanna Chandra, McGraw Hill
• Investment Fables, Ashwath Damodaran, Prentice Hall, 2004
• Hilpisch, Y. (2018). Python for finance: mastering data-driven finance. O'Reilly Media.
Journals:
• Journal of Portfolio Management
• Journal of Investing
• Wall Street Journal
Links to websites:
• www.aswathdamodaran.com, musingsonmarkets.com
• www.ritholtz.com,
• www.safalniveshak.com
Evaluation Scheme:
• Class Participation/ Pre-reading (Individual) 10%
• Assignments/Projects (2) individual/ group 25%
• Quiz (1) Individual 5%
• Mid-Term 25%
• Term-End Exam 35%
• Total 100%
Session Plan:

Sessio Topic (including Learning Outcomes Pedagogical ToolTextbook

n subtopics) Chapters &
Readings
1 Introduction to • Understand various types Lecture & Class Chapter 1,2
Investment of securities markets & Discussion [BKMM]
Marketplace classification: Money
Markets, Capital Markets,
Primary and secondary
markets;
• Understand the
characteristics of a good
market;
• What are the types of
stock exchanges?
2 Introduction to • Evaluate Theory of Class Discussion Chapter 5,6
Modern Portfolio choice under certainty [BKMM]
Theory • Evaluate Theory of
choice under uncertainty
• How to measure returns
and how to calculate
annualized return
• Define risk aversion using
utility theory
 • Apply the mean variance
algebra
• Apply the concept of
Diversification
3 Introduction to • Application of matrix Class Discussion Chapter 7 [BKMM]
Portfolio algebra using excel & In class excel
optimization • How to write mean, exercise on
standard deviation, Efficient frontier
variance -covariance using historical
matrix using functions in returns data of
excel more than 2 asset
• Creation of the portfolio case
of more than 2 assets
4 Portfolio • Create efficient frontier Class Discussion Chapter 7 [BKMM]
Optimization with R using two asset case & In class R
• Evaluate Effect on exercise on
efficient frontier if short Efficient frontier
selling is allowed using historical
• Evaluate Effect on returns data of 2
efficient frontier if risk assets case
less lending and
borrowing is allowed
5 Portfolio • Invoking Advanced In class R exercise Chapter 7 [BKMM]
Optimization with R Constraints
o Risk Budget,
o Box
o Group
o Diversification
o Target Return
Constraint
• Back Testing
6 Index Model, Capital • Optimize a Portfolio using Class Discussion Chapter 8,9
Asset Pricing Model a risk-free asset in the & Assignment1 on [BKMM]
(CAPM) portfolio Portfolio
• Learn about asset pricing optimization for
models more than 2 asset
• Critically Appraise the case using
Assumptions relating to historical data
the asset pricing model
7-8 Other Asset Pricing • Evaluate Arbitrage Pricing Class Discussion Chapter 10
Models Theory (APT), on Pre-reading [BKMM]
• Evaluate Fama-French 3 Pre-reading:
factor Dimensional Fund
• Evaluate Fama-French 4 Advisors, 2002
factor #203026-PDF-ENG
• Evaluate Fama-French 5 Published 2002
factor Revised 2003
HBS
09 Efficient Market • Evaluate Efficient Market Class Discussion Chapter 11
Hypothesis (EMH) Hypothesis and its [BKMM]
implications
 • Calculation and Analysis
of Cumulative Abnormal
returns
• How to perform the event
study
10 Fundamental • Ability to conduct Class Discussion Chapters 17,18,19
Analysis Macroeconomic and [BKMM]
Industry analysis;
• Use Equity Valuation
models
11 Technical Analysis I • Analyze using Indicators Class Discussion Class notes
Assignment 2
12 Introduction to • Indicators Hands-on Class Notes
Algorithmic Trading• Signals Exercises
(Python) • Rules
• Backtesting
13 Debt Instruments & • Debt Instruments & Class Discussion Class notes
Market Conventions Conventions on Day
count and price
quotations
14 Bond Price and Yield • Bond Pricing Class Discussion Chapters 14-15
• Bonds Yield [BKMM]
• Term structure of Interest
rates
15-16 Interest rate • Duration Class Discussion Chapters 15-16
sensitivity • Convexity [BKMM
• Bond Management
17 Active and Passive • Evaluate Active and Class Discussion Chapter 27
Management Passive management [BKMM]
strategies, Asset
Allocation strategies
• Evaluate The Treynor-
Black model
• Evaluate The Black –
Litterman model
18 Portfolio • Ability to use measures Portfolio Chapter 24
Performance like Sharpe’s measure, attribution [BKMM]
Measures Jensen’s alpha, Treynor analysis in class
measure. exercise for a
• Evaluate Attribution mutual fund
analysis
19 Testing Portfolio • Testing market timing In class exercise Chapter 24
performance of a skills on Testing market [BKMM]
Mutual fund • Testing stock selection timing and stock
skills selection skills of
a dynamic mutual
fund
20 Assignment Presenting fundamental and Student
Presentation technical analysis done presentations on
through stock game using real Assignment 2
data