SYLLABUS
FINA 5329-532: SEMINAR IN PORTFOLIO AND SECURITY ANALYSIS
SPRING 2003 (8-weeks from 1/13 to 3/10/2003)
M, W 5:30-8:20 PM
University Centers Dallas
Instructor: J. Andrew Hansz, Ph.D., CFA
Office: 619 Business Building
Office Hours: By appointment.
Phone: (817) 272-5843 E-mail: hansz@uta.edu
Website: http://www.uta.edu/faculty/hansz/ (Please check the website weekly for postings.)
Course Description:
The use of economic and accounting data in the selection of securities. Examination of current and traditional techniques used by investment practitioners. Specific topics include:
· Security Analysis Overview
· Market Efficiency
· Investment Tools and Economic Inputs
· Asset Allocation
· Innovations in Risk Measurement/Management
· Performance Evaluation
· Alternative Investments – Controlled Risk, Market Neutral, Hedge Funds, Venture Capital and Engineered Investment Strategies
· Human Behavior and Behavioral Finance
· Style Investing
Prerequisites:
Prerequisites: See graduate bulletin. FINA 5311 or equivalent. FINA 5323 is recommended. You should have basic knowledge of the fundamentals of portfolio theory, stock/bond valuation, and multiple regression analysis.
Course Format:
· Discussion/Seminar - Specific readings will be assigned for each class period. Class will be conducted in a seminar format and it is expected that each assignment will be read prior to class and you will be ready to discuss the material. You will be responsible for leading the class discussion several times throughout the course.
· Examinations – Two midterm exams and a final exam.
· Attendance and participation is required. Due to the seminar format of this course, class discussion and contribution is critical. Attendance will be taken.
Required Reading Packet:
The course reading packet is divided into five parts. Total cost should be approximately $50. Please note that if you own a copy of Investments 4th ed by Bodie, Kane, and Marcus you do not have to purchase the first reading packet.
Calculators and Spreadsheet:
A financial calculator (HP 10-B or equivalent) and a spreadsheet (Excel or equivalent) are required. You are responsible for learning the keystrokes. You may NOT store mathematical formulas and/or text for use on exams (see ‘academic honesty’ section). It is also assumed that you have spreadsheet skills and experience.
Grading:
Percent
Exam I 30%
Exam II 30
Final Exam 30
Preparation, Article Presentations,
Class Leadership, and Attitude 10
Total 100%
Generally, the grading scale used by the Instructor can be:
90 - 100% = A
80 - 89% = B
70 - 79% = C
60 - 69% = D
Below 60% = F
The instructor can apply a "curve" which could lower these ranges.
Make-up Examination Policy:
Due to the fast pace of the summer session, the exam make-up exam policy will be strictly enforced. A make-up exam will be given if the student has a reasonable, verifiable excuse. However, the make-up exam request must be made prior to the regularly scheduled exam. Students should not expect to take more than one make-up exam. The make-up exam must be completed before the end of the week in which the original exam was scheduled. The instructor reserves the rights to change the style, format, and content of a make-up examination. Once a student has taken an exam, a make-up exam cannot be given.
Policy on Attendance:
Students are expected to attend each class and students are expected to come to each class prepared and with all assignments completed. Students who must miss a class are responsible for obtaining all assignments, lecture notes, handouts, and announcements from a classmate.
Policy on Handing in Assignments Late:
Homework assignments may be made during the semester. A penalty per class period will be assessed for all assignments turned in late. Absence from class is not a valid excuse for handing in homework assignments late.
Policy on Disruptive Classroom Behavior:
This course will be conducted in a professional manner. Unprofessional behavior of any form in the classroom will not be tolerated. Students can be withdrawn at the discretion of the instructor for unacceptable behavior. Additionally, a portion of the final grade is attributed to class attitude/contribution. This grade, made at the instructor discretion, is based on attendance and attitude during class.
Academic Honesty:
It is the philosophy of The University of Texas at Arlington that academic dishonesty is a completely unacceptable mode of conduct and will not be tolerated in any form. All persons involved in academic dishonesty will be disciplined in accordance with University regulations and procedures. Discipline may include suspension form the University. You are responsible to maintain the standards of Academic Honesty included in the current UTA catalog.
Bomb Threats:
Effective April 8, 1996, the College of business Administration has adopted a policy to deal with the classroom disruption caused by bomb threats in the building. (A) Section 22.07 of the Texas Criminal Law Statutes states that a Class A misdemeanor is punishable by (1) a fine not to exceed $4,000, (2) a jail term of not more than one year, OR (3) both such a fine and confinement. (B) If anyone is tempted to call in a bomb threat, be aware that UTA has the technology to trace phone calls. (C) Every effort will be made to avoid cancellation of presentation/tests caused by bomb threats to the Business Building. Unannounced alternate sites will be available for these classes. If a student who has a class with a scheduled test or presentation arrives and the building has been closed due to a bomb threat, the student should immediately check for the alternate site notice which will be posted on/near the main doors on the south side of the Business Building. If the bomb threat is received while class is in session, your instructor will ask you to leave the building and reconvene at another location. (D) Students who provide information leading to the successful prosecution of anyone making a bomb threat will receive one semester’s free parking in the Maverick Garage across from the Business Building. UTA’s Crime stoppers will provide a reward to anyone providing information leading to an arrest. To make an anonymous report, call 817-272-5245.
Withdrawing:
It is the student’s responsibility to complete the course or withdraw form the course in accordance with University regulations. Students are strongly encouraged to verify their grade status before dropping a course after the first withdrawal date. A student who drops a course after the first withdrawal date may receive an “F” in the course if the student is failing at the time the course is dropped.
Drop for Non-payment:
It is the policy of the University of Texas at Arlington that students who have not paid by the census date and are dropped for non-payment cannot, under any circumstances, receive a grade for the course. Therefore, a student dropped for non-payment whom continues to attend the course will not receive a grade for that course. Emergency loans are available to help students pay tuition and fees. Students can apply for emergency loans by going to the Emergency Tuition Loan Distribution Center at E.H. Hereford University Center (near the southwest entrance.).
Student Evaluation of Teaching:
The following appears in Administrative Memorandum No. 98-5 dated August 21, 1997, from the President for academic and administrative offices. “Beginning in Fall 1997, teaching evaluations will be conducted in every class every semester for every instructor of record”.
College policy prohibits food and/or drink in classrooms and labs. Anyone bringing food and/or drink into a classroom or lab will be required to remove such items, as directed by the class instructor or lab instructor.
Other:
The University of Texas at Arlington supports a variety of student success programs to help you connect with the University and achieve academic success. They include learning assistance, developmental education, advising and mentoring, admission and transition, and federally funded programs. Students requiring assistance academically, personally, or socially should contact the Office of Student Success Programs at 817-272-6107 for more information and appropriate referrals.
Important Dates:
This is a tentative schedule. Adjustments will be necessary during the progression of the semester. It is the student’s responsibility to be aware of any changes announced in-class. Please check my website several times per week for updates and announcements.
Introduction and Security Analysis Review [82 pages] January 13 and 15
· Chapters 12 and 18 from Investments, 4th edition, Bodie, Kane and Marcus.
· “Market Efficiency,” Gary G. Schlarbaum, Equity Markets and Valuation Methods, (AIMR, 1987) [8 pages]
· “Chapter 1: The Loser’s Game” and “Chapter 2: Beating the Market,” Charles D. Ellis, Winning the Loser’s Game: Timeless Strategies for Successful Investing, 3rd edition, (Irwin, 1998) [13 pages]
· “Where, Oh Where Are the .400 Hitters of Yesteryear?” Peter L. Bernstein, Financial Analysts Journal, (AIMR, November/December 1998) [9 pages]
· “Why Johnny Can’t Invest,” Fortune Archives (Web), November 9, 1998. [6 pages]
· Two New York Times Articles:
· Exuberance is Rational
· Some Economists Call Behavior a Key
· Economic Analysis for Investment Professional (AIMR, 1997) [20 pp.]
“Using Economic Models,” Avery B. Shenfeld
“Economic Forecasts and the Asset Allocation Decision,” Abby Joseph Cohen
· “The Brave New Business Cycle: No Recession in Sight” by William Dudley and
Edward McKelvey of Goldman Sachs. 1997
Asset Allocation Part I [15+/- pages] January 29
· “Dynamic Strategies for Asset Allocation,” Andre Perold and William Sharpe, Financial Analysts Journal (AIMR, January/February 1988) [11 pp.]
Exam I February 3
Asset Allocation Part II [42 pages] February 5
· “Using Information from Trading in Trading and Portfolio Management,” David J. Leinweber, Execution Techniques, True Trading Costs, and the Microstructure of Markets (AIMR, 1993) [9 pp.]
· “Implementing Investment Strategies: The Art and Science of Investing,” Ch. 17, Wayne H. Wagner and Mark Edwards, Handbook of Portfolio Management, Frank J. Fabozzi, ed. (Frank J. Fabozzi Associates, 1998) [14 pp.]
· “Equity Style: What It Is and Why It Matters,” Ch. 1, Jon A. Christopherson and C. Nola Williams, The Handbook of Equity Style Management, 2nd edition, T. Daniel Coggin, Frank J. Fabozzi, and Robert D. Arnott, eds. (Frank J. Fabozzi Associates, 1997) [19 pp.]
Risk Measurement/Management [30 pages] February 10
· “Alternative Measures of Risk,” Roger G. Clarke, Investment Management, Peter L. Bernstein and Aswath Damodaran, eds. (Wiley, 1998) [17 pp.]
· “Value at Risk for the Asset Manager,” Mary Ellen Stocks and Christopher Ito, The Journal of Performance Measurement (The Spaulding Group, Summer 1997) [8 pp.]
· “Global Risk Management: Are We Missing the Point?” Richard Bookstaber, The Journal of Portfolio Management (Institutional Investor, Spring 1997) [5 pp.]
· “Evaluation of Portfolio Performance,” Ch. 24 (omit pp. 658-664), Modern Portfolio Theory and Investment Analysis, 5th edition, Edwin Elton and Martin Gruber (John Wiley & Sons, 1995) [33 pp.]
· “Asset Allocation: Management Style and Performance Measurement,” William F. Sharpe, The Journal of Portfolio Management (Institutional Investor, Winter 1992) [12 pp.]
· “Benchmark Portfolios and the Manager/Plan Sponsor Relationship,” Jeffery Bailey, Thomas Richards, and David Tierney, Current Topics in Investment Management, Frank Fabozzi and T. Dessa Fabozzi, eds. (Harper Collins 1990) [14 pp.]
· “Are Manager Universe Acceptable Performance Benchmarks?” Jeffery Bailey, The Journal of Portfolio Management (Institutional Investor, Spring 1992). [4 pp.]
· “Evaluation of Portfolio Performance,” Ch. 27, pp. 1132-1160, Investment Analysis and Portfolio Management, 6th edition, Frank K. Reilly and Keith C. Brown (Dryden, 2000). [28 pp.]
· Alternative Investing (AIMR, 1998) [22 pp.]
“Market Neutral: Engineering Return and Risk,” David Steyn
· “The Reality of Hedge Funds,” pp. 6-17 and pp. 32-36, Dave Purcell and Paul Crowley, Journal of Investing (Institutional Investor, Fall 1999) [34 pp.]
Business Week 2003 (February 24 to 28)
Alternative Investments - Venture Capital and Engineered Investment Strategies
[38 pages] February 26
· “Valuing Potential Investments – Part I,” C. Kevin Landry, Investing in Venture Capital [7 pages]
· “Venture Catalysts or Vulture Capitalists?” W. Keith Schilit, The Journal of Investing, (Institutional Investor, Fall 1996) [10 pages]
· “Selecting and Structuring Investments: The Venture Capitalist’s Perspective,” Lee A. Gardella, Readings in Venture Capital, (AIMR, 1996) [6 pages]
· “Structuring a Venture Capital Portfolio: An Investor’s Perspective,” Henry G. Robin, Readings in Venture Capital, (AIMR, 1996) [6 pages]
· “Engineered Investment Strategies: Problems and Solutions,” Robert Hagin, Equity Markets and Valuation Methods, (AIMR, 1988) [7 pages]
Human Behavior and Behavioral Finance [51 pages] March 3
· **“Ch 7: Information-Processing Theory of Human Problem Solving,” Herbert A. Simon, Human Problem Solving, [25 pages]
· “The Psychology of Risk,” Amos Tversky, Quantifying the Market Risk Premium Phenomenon for Investment Decision Making (AIMR, 1990) [5 pp.]
· “Behavioral Risk: Anecdotes and Disturbing Evidence,” Arnold Wood, Investing Worldwide VI (AIMR, 1996) [5 pp.]
· “Behavioral Finance versus Standard Finance,” Meir Statman, Behavioral Finance and Decision Theory in Investment Management (AIMR, 1995) [8 pp.]
· “Investor Psychology and Market Inefficiencies,” Meir Statman [7 pages]
Style Investing [36 pages] March 5
· Style Investing, Richard Bernstein (Wiley, 1995)
“The Economics of Nominal Earnings Growth and Investor Risk Perception,” Ch. 2
“The Importance of Expectations,” Ch. 3
“Growth vs. Value,” Ch. 4
Class Attendance Form
Name ________________________
Let’s divide the class into two sessions (before the break and after the break). An absence is defined as missing 10 (or more) minutes of a session. Please reference your calendar and checkmark attended sessions. Please submit by March 10th.
Class Date - Topic Before Break/After Break
(checkmark all sessions attended)
(put a “P” in the session you present)
1 1/13 – Introduction ____ Yes / _____ Yes
2 1/15 – Stock Analysis Review ____ Yes / _____ Yes
3 1/22 - Market Efficiency ____ Yes / _____ Yes
4 1/27 – Investment Tools and Economic Inputs ____ Yes / _____ Yes
5 1/29 – Asset Allocation Part I ____ Yes / _____ Yes
6 2/5 – Asset Allocation Part II ____ Yes / ______ Yes
7 2/10 – Risk Measurement/Management ____ Yes / ______ Yes
8 2/12 – Performance Evaluation Part I ____ Yes / _____ Yes
9 2/17 – Performance Evaluation Part II ____ Yes / _____ Yes
10 2/24 – Alternative Investments ____ Yes / _____ Yes
11 2/26 – Alternative Investments ____ Yes / _____ Yes
12 3/3 – Human Behavior & Behavioral Finance ____ Yes / _____ Yes
13 3/5 – Style Investing ____ Yes / _____ Yes