180

180.367 – Investments and Portfolio Management: Spring 2008.

Course Outline

This is an introductory course in investments. The course is broken into four parts. The first part covers the fundamental concepts of asset returns, risk, and risk-aversion, and then studies how investors should optimally choose their portfolios given the observed patterns of risk and return. The second part of the course studies the reverse question: given how investors choose their portfolios, what are the equilibrium patterns of risk and expected return in financial markets: in other words, what is the expected return that various types of assets must earn to compensate investors for bearing their risk. The second question is studied in the context of two theories of returns: the capital asset pricing model and arbitrage pricing theory. The third part of the course studies the empirical evidence for and against the equilibrium theories of asset returns, with an emphasis on the evidence in support and against the efficient markets hypothesis. The fourth and final part of the course studies three classes of assets in more detail. The topics that are covered include models of equity valuation, bond valuation and hedging, and option valuation and hedging.

Course Syllabus

Course Locations and Times

Lecture: Hodson 311, Tuesdays 3 – 4:50 PM

Sec 01: Hodson 216, Thursdays 4:30 – 5:20 PM on dates indicated in the announcements.

Sec 02: Hodson 216, Fridays 1:30 – 2:20 PM on dates indicated in the announcements.

Contact Information

Instructor: Matt Pritsker

Email: mpritsker@frb.gov

OH: Mergenthaler 457, Tuesdays by appointment after class.

Phone: (202) 452-3534 (Washington)

Phone: (410) 516-5728 (On Tuesday after class)

TA: Tony Williams

Email: tony.williams@jhu.edu

OH: Mergenthaler 466, Thursdays, 2:30 -4:20 pm, and by appointment.

Announcements

January 28, 2008: Problem Set 1 Posted. Due on Feb 12 at the beginning of class.

Jan 31, and Feb 1: No Discussion section.

Feb 7 and 8: First meeting of discussion section. Statistics for portfolio problems and matrix algebra for portfolio problems will be covered.

Feb 14 and 15: Discussion section will cover efficient frontiers using matrix algebra in excel, and will also discuss the answers to the first problem set (See supplemental course notes for class on February 12).

Feb 17: Problem Set 2 Posted. Due on Feb 26 at the beginning of class.

Feb 28 and 29: Midterm Reviews will be held in discussion section. Relevant review materials are last years first midterm and review sheet for that midterm.

Feb 28: Solutions to problem set 2 posted.

March 4: Midterm. Midterm Answers

March 11: We will cover efficient markets on March 11. We will also have a guest teacher, Scott Black, for the second half of the class. Scott is a Johns Hopkins alumnus, and Founder of the Investment Company, Delphi Management.

March 25: We will back track and cover the Arbitrage Pricing theory this week. An updated syllabus that covers the rest of the semester is posted on the course web site.

March 25: Problem set 3 is posted. Problem set 4 will be posted shortly. Problem set 3 will be due April 1. Problem set 4 will be due April 8.

March 27 and 28: There will be no discussion section this week.

May 15: Final Exam. Hodson 210 from 2 - 5 PM.

Exam Content: A handout was distributed on the last day of class. Because I did not get to go over the handout in class, any new material on the handout that was not previously covered in class, will not be covered on the midterm.