Investment Portfolio Management

Syllabus

1. Course outline

The course presented examines the theoretical basis and practical approach to the

management of stocks and fixed income investment portfolios.

The course objective is to acquaint students with the theoretical foundation of modern

portfolio theory, the major groups of investors and their investment objectives and

constraints, and to master practical skills in investment management, forming capital

market

expectations and forecasting markets activity to justify major investment portfolio

management strategy for equity and fixed-income instruments.

A distinctive feature of the course is to focus on practical issues of managing the

investment portfolio, ground on the results of recent academic research in the field of

portfolio management.

It is expected to have practical classes with Thomson-Reuters Eikon information

terminal.

As a result of the course, students will know the basic theoretical foundations of

portfolio theory, understand the investment process scope and stages, be able to form

market expectations and build strategic asset allocation, select the optimal investment

strategy.

2. Syllabus

I. The investment process, milestones portfolio management

Planning

Implementation

Monitoring and rebalancing

II. Investment objectives and constraints of the different groups of investors

Private investors

Pension funds

Insurance companies

Foundations and endowments

Banks

III. Assessment of market expectations

The analytical process

Limitations of economic data and analysis methods

Psychological Traps

Basic model group

Economic analysis and market forecasts

IV. Strategic asset allocation

The importance of asset allocation

Asset and Liability Management (ALM)

Financial Psychology

Selection of asset classes

Optimization

V. Portfolio management, fixed income

Bond Portfolio Management Strategies

Active and passive portfolio management

Sources of income from fixed-income instruments

Investing in foreign bond markets

VI. Managing a portfolio of stocks

Active and passive management of a portfolio of stocks

Equity Indices

Tools passive investing

Investment Styles

Analysis of investment styles based on portfolio and income

A market-neutral investment

3. Prerequisites

Effective development of the course involves the students' understanding of the

foundations of portfolio theory, the characteristics of the financial instruments, the

understanding of investment risk, return, diversification effects.

It is assumed that students have already mastered the following courses:

Corporate Finance

Analysis of the securities

Financial Mathematics

4. Forms of control

Control of knowledge and evaluation of students is based on a standard 10-point scale

adopted in the HSE. The final assessment of the test consists of three components:

The total activity in the classroom and in the audience of independent work,

Intermediate results of a written test,

Final practical case.

The final assessment of the results of the two components formed with the following

weights:

work during the course – 40%

The final practical work 60%

Intermediate written test is conducted in the format of multiple choice.

The final practical case is an independent preparation of the investment declaration

and strategic asset allocation of the portfolio of a private investor on the basis of

historical

data obtained in the practical class in Thomson-Reuters with Eikon terminal.

Investment declaration must include:

Setting investment goals and constrains,

Estimates of market expectations,

Portfolio optimization,

Preparing client presentations.

5. References and readings

1. John L. Maginn, CFA (Editor), Donald L. Tuttle, CFA (Editor), Dennis W.

McLeavey, CFA (Editor), Jerald E. Pinto, CFA (Editor). Managing Investment

Portfolios: A Dynamic Process. 3rd Edition. April 2007.

2. Dan Nevins. «Goals-based Investing: Integrating Traditional and Behavioral

Finance». By SEI, October 2003.

3. Hammond, John, Ralph Keeney, and Howard Raiffa. 1998. «The Hidden Traps in

Decision Making.» Harvard Business Review. Vol. 76, No. 5: 47–58.

4. Bekaert, Geert, Robert Hodrick, and David Marshall. 2001. «Peso Problem

Explanations for Term Structure Anomalies.» Journal of Monetary Economics. Vol.

48, No. 2: 241–270.

5. Goetzmann, William, and Philippe Jorion. 1999. «Re-Emerging Markets.» Journal of

Financial and Quantitative Analysis. Vol. 34, No. 1: 1–32.

6. Dimson, Elroy, Paul Marsh, and Mike Staunton. 2002. Triumphs of the Optimists:

101 Years of Global Investment Returns. Princeton, NJ: Princeton University Press.

7. Dimson, Elroy, Paul Marsh, and Mike Staunton. 2006. Global Investment Returns

Yearbook 2006. ABN-AMRO.

8. Kurz, Mordecai, Hehui Jin, and Maurizio Motolese. 2005. «Determinants of Stock

Market Volatility and Risk Premia.» Annals of Finance. Vo1.1, No. 2: 109–147.

9. Grinold, Richard, and Kenneth Kroner. 2002. «The Equity Risk Premium.»

Investment Insights from Barclays Global Investors. Vol. 5, No. 3.

10. Black, Fischer, and Robert Litterman. 1991. «Asset Allocation: Combining Investor

Views with Market Equilibrium.» Journal of Fixed Income. Vol. 1, No. 2: 7–18.

11. Black, Fischer, and Robert Litterman. 1992. «Global Portfolio Optimization. Charles

D. Ellis «The Loser’s Game.» The Financial Analysts Journal, Vol. 31, No. 4,

July/August 1975, 19-26. New York: Financial Analysts Federation.

12. Charles D. Ellis «The Winner's Game. Making your own plan is often quite

rewarding.»

13. Sharpe, William. 1991. «The Arithmetic of Active Management.» Financial Analysts

Journal. Vol. 47, No. 1: 7–9.

14. Daniel, Kent, Mark Grinblatt, Sheridan Titman, and Russ Wermers. 1997.

«Measuring Mutual Fund Performance With Characteristic-Based Benchmarks.»

Journal of Finance. Vol. 52, No. 3:1035 – 1058.

15. Elton, Edwin, Martin Gruber, and Jeffrey Busse. 2004. «Are Investors Rational?

Choices Among Index Funds.» Journal of Finance. Vol. 59, No. 1: 261–288.

16. Sharpe, William. 1988. «Determining a Fund’s Effective Asset Mix.» Investment

Management Review. Vol. 2, No. 6: 59–69.

4 17. Sharpe, William. 1992. «Asset Allocation, Management Style and Performance

Measurement.» Journal of Portfolio Management. Vol. 18, No. 2: 7–19.

18. Charles D. Ellis «The Loser’s Game.» The Financial Analysts Journal, Vol. 31, No.

4, July/August 1975, 19-26. New York: Financial Analysts Federation.

19. Charles D. Ellis «The Winner's Game. Making your own plan is often quite

rewarding.»

20. Sharpe, William. 1991. «The Arithmetic of Active Management.» Financial Analysts

Journal. Vol. 47, No. 1: 7–9.

21. Daniel, Kent, Mark Grinblatt, Sheridan Titman, and Russ Wermers. 1997.

«Measuring Mutual Fund Performance With Characteristic-Based Benchmarks.»

Journal of Finance. Vol. 52, No. 3:1035 – 1058.

22. Elton, Edwin, Martin Gruber, and Jeffrey Busse. 2004. «Are Investors Rational?

Choices Among Index Funds.» Journal of Finance. Vol. 59, No. 1: 261–288.

23. Sharpe, William. 1988. «Determining a Fund’s Effective Asset Mix.» Investment

Management Review. Vol. 2, No. 6: 59–69.

24. Sharpe, William. 1992. «Asset Allocation, Management Style and Performance

Measurement.» Journal of Portfolio Management. Vol. 18, No. 2: 7–19.

25. Financial Analysts Journal. Vol. 48, No. 5: 28–43

26. Tversky, Amos. 1990. «The Psychology of Risk.» Quantifying the Market Risk

Premium Phenomenon for Investment Decision-Making. Charlottesville, VA: AIMR.

27. Brunel, Jean. 2002. Integrated Wealth Management: The New Direction for Portfolio

Managers. New York: Institutional Investor Books.

28. Volpert, Kenneth. 2000. «Managing Indexed and Enhanced Indexed Bond

Portfolios.» Fixed Income Readings for the Chartered Financial Analyst Program.

New Hope, PA: Frank J. Fabozzi Associates.

29. Fong, H. Gifford and Oldrich Vasicek. 1984. «A Risk Minimizing Strategy for

Portfolio Immunization.» Journal of Finance. Vol. 39, No. 9: 1541–1546.

30. Charles D. Ellis «The Loser’s Game.» The Financial Analysts Journal, Vol. 31, No.

4, July/August 1975, 19-26. New York: Financial Analysts Federation.

31. Charles D. Ellis «The Winner's Game. Making your own plan is often quite

rewarding.»

32. Sharpe, William. 1991. «The Arithmetic of Active Management.» Financial

Analysts Journal. Vol. 47, No. 1: 7–9.

33. Daniel, Kent, Mark Grinblatt, Sheridan Titman, and Russ Wermers. 1997.

«Measuring Mutual Fund Performance With Characteristic-Based Benchmarks».

Journal of Finance. Vol. 52, No. 3:1035 – 1058.

34. Elton, Edwin, Martin Gruber, and Jeffrey Busse. 2004. «Are Investors Rational?

Choices Among Index Funds.» Journal of Finance. Vol. 59, No. 1: 261–288.

35. Sharpe, William. 1988. «Determining a Fund’s Effective Asset Mix.» Investment

Management Review. Vol. 2, No. 6: 59–69.

36. Sharpe, William. 1992. «Asset Allocation, Management Style and Performance

Measurement.» Journal of Portfolio Management. Vol. 18, No. 2: 7–19