Investment Analysis (Advanced Level)

2020/2021

Academic Year

ENG

Instruction in English

4

ECTS credits

Delivered at:

Department of Finance

Course type:

Elective course

When:

2 year, 1, 2 module

Instructor

Churakova, Iya

Course Syllabus

Abstract

The course deals with the asset allocation process and focuses on questions concerning the price predictability on financial markets. Prerequisites: "Basic finance: asset classes", "Factor models", "Basic econometrics"

Learning Objectives

• The purposes of the course "Investment Analysis (advanced level)" are the following: 1. To give the masters the conceptual foundations of investment analysis, basic principles and ideas about evaluating the effectiveness of commercial investments; 2. To form a system of theoretical and practical knowledge and skills in the field of business valuation. The objectives of the discipline are: 1. To study theoretical and practical foundations of investment assessment of a business; 2. To develop methods and technologies for investment analysis in theory and practice; 3. To master the skills of analysis of investment efficiency and business value based on the assessment of capital investments made; 4. To master the practice of econometric calculations necessary for analysis investment efficiency and business valuation; 5. To analyse of existing and the creation of new directions for the development of entrepreneurial activities based on analysis of investment performance and business valuation.

Expected Learning Outcomes

• Knowing the steps of the asset allocation process, understanding the discussion on market efficiency and price predictability, its reasons and consequences.

Course Contents

• The asset allocation process
  Strategic versus tactical asset allocation, performance measurement, investment styles, repetition: market efficiency
• Strategic asset allocation: mean variance optimization revisited
  Repetition: The efficient frontier; problems of mean-variance optimization, alternatives to mean-variance optimization.
• Technical analysis: is it profitable?
  Introduction to technical analysis, use and profitability of technical analysis, why is technical analysis (potentially) profitable?
• Tactical asset allocation: can professionals time the market?
  What is market timing? Tests for market timing, empirical evidence
• Price anomalies, especially price momentum
  Categories of price anomalies, price reversals and price continuation, the sources of momentum effects, momentum crashes, cross sectional versus time series momentum
• Behavioural finance I: Limits to arbitrage
  What does behavioural finance deal with? Limits to arbitrage, the separation of brain and capital
• Behavioural finance II: Noise traders and their impact
  What is a noise trader?, noise trader risk: the model by De Long, Shleifer, Summers and Waldman
• Cognitive biases, prospect theory, adaptive market hypothesis
  Cognitive biases, prospect theory and momentum, adaptive market hypothesis: integrating efficient market hypothesis and behavioural finance
• Cointegration (methodology) and bubbles
  Introduction to the cointegration methodology, bubbles: definition and historical survey (Tulipmania), testing for bubbles, periodically collapsing bubbles
• Market microstructure and price predictability
  What does market microstructure deal with?, order flow and news processing, informative trades, example: intraday momentum

Assessment Elements

• Report/Presentation
• In-Class Participation
• Written Assignment
• Exam

Interim Assessment

• Interim assessment (2 module)
  0.4 * Exam + 0.1 * In-Class Participation + 0.1 * Report/Presentation + 0.4 * Written Assignment

Bibliography

Recommended Core Bibliography

• Michael Frömmel. (2016). Finance 1: Portfolio Theory and Management. Books on Demand.

Recommended Additional Bibliography

• DeFusco, R. A., McLeavey, D. W., Pinto, J. E., & Runkle, D. E. (2015). Quantitative Investment Analysis (Vol. Third edition). Hoboken, New Jersey: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1082450