investments
PREREQUISITES: MICROECONOMICS; MaCROECONOMICS; moneytary economics; economitrics
OBJECTIVES
This is a series of lectures to introduce the field of investment analysis, as well as the newly designed securities and trading strategies. This course is a sub-discipline of applied economics concerned with the study of the security analysis and fundamental principle of portfolio selection. It is distinguished from other courses by its direct transmission of theory to real-world practice. The course is unified along the line of what security is, how security is traded, how security is priced, as well as some empirical methods that link theory to practice. In sum, this course offers a much broader and deeper treatment of stocks, bonds, mutual funds, derivatives, IPO, security trading mechanisms, portfolio selection principle, asset pricing theory, equity valuation, bond valuation, fundamental analysis, technique analysis, as well as investment strategies.
PROGRESSIVE ASSESSMENT
Coursework assignment (30%)
2 hour examination (70%)
RECOMMENDED TEXTS
1. Hu, Jinyan,Investments(Second Edition), China Higher Education Press, 2013.
2. Bodie, Zvi, Kane, A., Marcus, A.Investments(Eighth Edition), McGraw-Hill/Irwin, 2009.
TOPICS TO BE COVERED IN THE LECTURES/ CLASS SCHEDULE
Week 1: Introduction of Investments and financial markets
References：
Hu, Jinyan, Investments(Second Edition), ChinaHigher Education Press, 2013, Chapter1
Bodie, Zvi, Kane, A., Marcus, A. Investments, McGraw-Hill/Irwin, 2009, Chapter 14
Week 2: Stocks, bonds and mutual funds
References：
Hu, Zhanghong, Wang, Xiaokun. “The Empirical Study on Chinese A-H Share Premium,” 经济研究, 2008(4)
Yang, Ping, Xu, Xinzhong, Yang, Yunhong. “The Cross-Sectional Analysis of Price Differences of Dual-Listed Shares,” 管理世界, 2007(9)
Wu, Wenfeng, Zhu, Yun, Wu, Chongfeng, Rui, Meng. “The Effect of Opening B Shares Market to Domestic Investors on Market Segmentation,” 经济研究, 2002(12)
Xie, Shiqing, Shao, Yuping. “股权分置改革对中国股市波动性与有效性影响的实证研究,” 金融研究, 2011(2)
Wu, Jiang, Ruan, Tong. “股权分置结构与中国上市公司融资行为,” 金融研究, 2004(6)
Zhou, Chunsheng, Ma, Guang. “中国上市公司的股权结构与财务报表更正,” 金融研究, 2005(11)
Week 3: How securities are traded
References：
Economides, Nicholas, and Schartz, Robert, “Electronic Call Market Trading,” Journal of Portfolio Management, Spring 1995, pp. 10-18
Hu, Jinyan, Investments(Second Edition), China Higher Education Press, 2013, Chapter 7
Bodie, Zvi, Kane, A., Marcus, A. Investments, McGraw-Hill/Irwin, 2009, Chapter 3
Week 4: The security issue markets and IPO
References：
Zhu, Hongjun, Qian, Youwen. 中国IPO 高抑价之谜：“定价效率观”还是“租金分配观”？管理世界, 2010(6)
Zou, Gaofeng, Zhang, Wei, Xu, Xiaowan. “Factors affecting IPO under-pricing and its composition in Chinese market,” 管理科学学报, 2012(4)
Week5: Equity valuation—the dividends discount model
References：
Bower, Dorothy, and Bower, S. Richard. “Test of Stock Valuation Model,” Journal of Finance, 1970, XXV, pp. 483-492
Miller, M., and Modigliani, F. “Dividend Policy, Growth, and the Valuation of Shares,” Journal of Business, 1961, 34, pp. 411-433
Week6: Equity valuation—perspective of Behavior Finance
References：
Shiller, R. “Irrational Exuberance.” Princeton University Press, 2005
Kindleberger, C. and Aliber, R. “Manias, Panics and Crashes: A History of Financial Crises.” John Wiley & Sons, Ltd.
Week7: Fundamental Analysis
References：
Penman, Stephen H. “The Predictive Contents of Earnings Forecasts and Dividends,” The Journal of Finance, 1983, 38(4), pp. 1181-1200
Cragg, J.G., and Malkiel, Burton. “The Consensus and Accuracy of Some Predictions of the Growth of Corporate Earnings,” Journal of Finance, 1968, XXIII, pp. 67-84
Week8: How good are Fundamental Analysis and Technique Analysis?
References：
Brown, Stephen J., and Warner, Jerold B. “Measuring Security Price Performance,” Journal of Financial Economics, 1980, 3, pp. 205-258
Elton, Edwin J., and Gruber, Martin J. “Earnings Estimates and Accuracy of Expectational Data, ” Management Science, 1972, 18, pp. 409-424
Week9: Bond pricing and bond yields
References：
Hu, Jinyan, Investments(Second Edition), China Higher Education Press, 2013, Chapter 11
Bodie, Zvi, Kane, A., Marcus, A. Investments, McGraw-Hill/Irwin, 2009, Chapter 14
Week10: the Interest rates structure and bond ratings
References：
Lutz, Friedrich A. “The Structure of Interest Rates,” Quarterly Journal of Economics, 1940, LV, pp. 36-63
Carleton, W.T., and Cooper, I.A. “Estimation and Uses of the Term Structure of Interest Rate,” Journal of Finance, 1976, 31, pp. 1067-1083
Week11: the Interest rates structure and bond ratings
References：
Chance, Don M. “Default Risk and the Duration of Zero Coupon Bonds,” Journal of Finance, 1990, 45(1), pp. 265-274
Fama, E. “Term Premiums in Bond Returns,” Journal of Financial Economics, 1984, 13(4), pp. 529-546
Week12: Risk, Return, Preference and Capital Allocation
References：
Markowitz, H. “Markowitz Revised,” Financial Analysts Journal, 1976, 32(4), 47-52
Elton, E.J., and Gruber, M.J. “Modern Portfolio Theory: 1950 to Date,” Journal of Banking and Finance, 1997, 21(11), pp. 1743-1759
Week13: Principle of Portfolio Diversification
References：
Alexander, Gordon. “The Derivation of Efficient Sets,” Journal of Financial and Quantitative Analysis, XI(5), 1976, pp. 817-830
Lewis, Alan L., “A Simple Algorithm for the Portfolio Selection Problem”, Journal of Finance, 1988, 43(1), pp. 71-82
Week14: Capital Asset Pricing Model
References：
Sharpe, W.F. “Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk,” Journal of Finance, 1964, pp. 425-442.
Lintner, J. “Security Prices, Risk, and Maximal Gains form Diversification,” Journal of Finance, 1965, pp. 930-932.
Week15: Arbitrage Pricing Theory and Efficient Market Hypothesis
References：
Ross, S.A. “The Arbitrage Theory of Capital Asset Pricing,” Journal of Economic Theory, 13, pp. 341-360
Fama, E. “Efficient Capital Market: A Review of Theory and Empirical Work,” Journal of Finance, 1970, XXV(2), pp. 383-417.
Fama, E. “Efficient Capital Market II,” Journal of Finance, 1991, 26(5), pp. 1575-1617.
Week16: Empirical Test of the Asset Pricing Models
References：
Roll, Richard, and Ross, Stephen. “An Empirical Investigation of Arbitrage Pricing Theory,” Journal of Finance, 35(5), 1980, pp. 1073-1105
Scholes, M., and Williams, J. “Estimating Betas from Nonsynchronous Data,” Journal of Financial Economics, 1977(5), pp. 309-327
Week 17: Examination