Investment Management (BA 4346)

Spring 2006

Professor Harold H. Zhang Telephone: 972-883-4777

Email: harold.zhang@utdallas.edu Office: 3.806 SOM

Office hours: 6:00-7:00pm Thursday or by appointment

Course Objective

The primary objective is to provide an understanding of the role of modern financial

theory in portfolio management and to present a framework for addressing a wide range
of issues in the management of financial assets. The course will emphasize intuition and
practical applications of investment theory as well as some analytical analysis. Topics to
be covered include financial markets, portfolio theory and its applications, and asset
valuation. The course best suits the following students (but not limited to):

• Those who want to know how to invest for their own benefit.
• Those who aspire to pursue a career in investment banking.
• Those who want to be a powerful security analyst.
• Those who want to become a professional money manager.

Course Materials

Teaching materials are drawn from several books, newspapers, and periodicals. There are
assigned readings for each class. I expect students come to class prepared for the
materials that will be covered that day (the required readings are identified as BKM# for
the chapter in the textbook). You will find the materials much easier to grasp if you have
read the assigned materials in advance. I may make cold calls on students to answer
questions. It would be wonderful if all your comments were brilliant, but that is an
unreasonable standard for you and for me. You will find that a perfectly creditable
performance can be turned in with reasonable preparation and diligence on your part.

• Required textbook: Essentials of Investments by Zvi Bodie, Alex Kane, and Alan
Marcus, 5th edition, Irwin/McGraw Hill, 2004.
• Recommended periodicals and newspapers: Wall Street Journal, Business Week,
Economist (most of the web editions are free, though you may need to register
online).
• Books for fun: (1) A Random Walk Down Wall Street by Burton Malkiel. (2)
Liar’s Poker by Michael Lewis. (3) Big Bets Gone Bad by Philippe Jorion.
• Movies for fun: Wall Street, Trading Places, Barbarians at Gate, Boiler Room.
Course Requirements

There will be six written assignments, one midterm, and a final exam. The assignments
are due before the class on the due date. I will not accept late assignments. If you have to
be out of town for an emergency, you may want to make an arrangement to ask someone
to turn in your assignment. I will drop the lowest grade on your assignments. The
midterm and the final exam will be close-book. But you can bring one standard size (8.5
x 11) cheat-sheet (both sides) for the midterm and two standard size (8.5 x 11) cheat-
sheets (both sides) for the final exam.

The course content builds on students’ knowledge learned in the introductory finance
class. In light of the rapid growth of complex financial instruments to manage various
financial risks, it is inevitable for us to use some basic mathematics to facilitate the
analysis of these financial instruments. Although I will make an effort to keep the use of
mathematics at minimum, some knowledge of calculus and statistics will be very helpful.
Knowledge in spreadsheet (EXCEL or equivalent) is a must. We may have assignments
involving extensive use of spreadsheet.

Attendance is mandatory. If you miss a class, you will be responsible for the materials
covered that day. I strongly discourage entering/leaving the classroom during the class
because it distracts other students. My experience tells me that missing classes on a
regular basis will put you in a disadvantageous position because not all class materials are
covered in the textbook. I expect you to seek help from me in a timely way if you do not
understand the course content and analysis. It would be hard to try to understand
everything a few days before the exams.

Grading

Your grade will be based on your assignments, the midterm and the final exam. The
weights are given below:

Assignments 25%
Midterm 30%
Final Exam 45%

Grades will be curved based on the weighted average scores. Request for re-grading must
be in written form. I will re-grade the entire exam upon receiving your written re-grading
request. I expect that all the work will be done in complete observance of the University’s
Honor Code.
 Schedule and Course Outline

Date Topic Readings

Jan. 12 Overview of Investments BKM 1

Jan. 19 Money and Fixed-Income Markets BKM 2

Jan. 26 Stocks and Indices BKM 2

Feb. 2 Security Trading BKM 3

Feb. 9 Mutual Funds BKM 4

Feb. 16 Risk and Return BKM 5

Feb. 23 Efficient Diversification BKM 6

Mar. 2 Midterm Exam (in class)

Spring Break

Mar. 16 Capital Asset Pricing and BKM 7

Arbitrage Pricing Theory

Mar. 23 Market Efficiency and BKM 8

Portfolio Management

Mar. 30 Bond Characteristics BKM 9

Apr. 6 Managing Fixed-Income BKM 10

Investments

Apr. 13 Equity Valuation BKM 12

Apr. 20 Options Market BKM 14 and 15

Apr. 27 Final Exam (in class 7:00-10:00pm)