This document is updated on Feb. 18th at 2:00PM.

As of now, the schedule is more or less complete. 

All our classes are scheduled from 10:15am to 12 noon. All except classes 1 and 2 are scheduled in room 750. The following represents a tentative outline of topics, associated readings and approximate dates for the course:

• Introductions, Course Outline, Requirements, Resources
• Course Trading Game: Rules and Requirements
• Taxonomy of Securities and Markets
• Definition of Returns on Securities
• Historical Record of Returns on Different Securities
• New economy and investment industry.

Readings:

• XBKM, chapters 1-2. 
• X Jeremy J. Siegel, "Stocks and Bonds since 1802," chapter 1 in  Stocks for the Long Run : The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies, McGraw-Hill, pp. 3-24.
• X William N. Goetzmann and Philippe Jorion, “A Century of Global Stock Markets,” NBER working paper n°5901.
• Satyajit Das, "e-Business and Wholesale Financial Services," Futures and Options World, May, June, July, 2000. This is series of three short but informative papers assessing what 'new economy' is with respect to financial services.
• Peter Coy, "Economics: How Risky Is the Risk Premium?" Business Week, Dec. 25, 2000.
• EXTRA The Internet and Financial Services Report, Morgan-Stanley-Dean-Witter report on Internet and Financial Services. Can be downloaded from http://www.msdw.com/techresearch/financeser/info.html (it is not part of the package due to its length, but is worth reading!)

• EXTRA Robert J. Gordon, "Does the "New Economy" Measure up to the Great Inventions of the Past?", NBER Working Paper No. W7833, Issued in August 2000.

• Securities Exchanges and Markets
• Trading Arrangements: Orders, Margin Trading, Short Sales
• Brokers' Services and Costs

Slides are here 

Readings:

• X BKM, Chapter 3.
• Walter Bagehot, "The Only Game in Town," Financial Analysts Journal, 1971. 
•  Eric Moskowitz, "Public markets," Red Herring Magazine, Dec. 4, 2000. 
• EXTRA Ananth Madhavan, "Market microstructure: A survey," Journal of Financial Markets, vol. 3(3), Pages 205-258.
  

• Representation of risk by variance
• Risk tolerance and asset allocation
• Portfolio optimization
• Domestic diversification
• Index funds
• International diversification

Slides are here 

Readings:

• XBKM, Chapters 6-8.
• XSteven L. Heston and K Geert Rouwenhorst, "Industry and country effects in international stock returns," Journal of Portfolio Management; New York; Spring 1995.
• XK Geert Rouwenhorst, "European Equity Markets and EMU: Are the Differences Between Countries Slowly Disappearing?", Yale SOM Working Paper.
• John Y. Campbell, Martin Lettau, Burton G. Malkiel, Yexiao Xu, "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," NBER Working Paper W7590, 2000.
• Brad Barber and Terrance Odean, "The Courage of Misguided Convictions," Financial Analysts Journal, November/December 1999, 41-55. 

The case is due at 10:15 am on Tuesday, Jan. 23rd.

The class is going to be divided into two groups. One group is going to have class discussion on Tuesday, Jan. 23rd, 10:15 - 12:00 (rm. 750), another one - on Wednesday, Jan. 24th 10:15-12:00 (rm.750).  I am grading this case myself.

• Questions are HERE.

CAPM session: Jan 29th at 10:15-12:00 (rm. 750) Slides are here 

APT session: Feb. 5th at 10:15-12:00 (rm. 750) Slides are here 

• Derivation and intuition
• Testing CAPM
• Concept of Exposure.
• Multi-factor pricing models and APT.
• Value vs. growth.

DUE AT SESSION 6:  Beta Management Company Case.  Questions are HERE. We are going to discuss this case only briefly, no special session is scheduled. Your write -ups are going to be graded by Mr. Andriy Bondaruk (finab@hhs.se).

Readings

• X BKM, Chapters 9 and 10 (CAPM)
• X Empirical Tests of Equilibrium Models, Chapter 15 in Modern Portfolio Theory and Investment Analysis by Edwin Elton and Martin Gruber, John Wiley and Sons, 1995
• X BKM, Chapter 11 (APT)
• X Philippe Jorion, "Portfolio Optimization in Practice," Financial Analysts Journal, Charlottesville; Jan/Feb 1992; Vol. 48, Iss. 1; pages 68-75.
• EXTRA John H. Cocrane, "Portfolio Advice for a Multifactor World," NBER Working Paper No. W7170, issued in June 1999. Also published in Economic Perspectives, Federal Reserve Bank of Chicago, Vol. 23, no. 3(1999): 59-78.
• Eugene Fama and Kenneth R. French, appendixes to Dimensional Fund Advisors case

• Measuring Investment Returns
• Conventional Measurement Techniques
• Testing for Market Timing Skills
• Style analysis
• Returns and flows

Readings:

• X BKM, Chapters 24.
• Mark M. Carhart, "On Persistence in Mutual Fund Performance", Journal of Finance, 52(1), March 1997, pages 57-82. 
• X Judith Chevalier and Glenn Ellison, "Are Some Mutual Fund Managers Better Than Others? Cross-Sectional Patterns in Behavior and Performance," Journal of Finance, 54(3), June 1999, pages 875-899. 
• X William Sharpe, "Asset Allocation: Management Style and Performance Measurement", Journal of Portfolio Management, Winter 1992, 7-19.
• Stephen J Brown and William N. Goetzmann, "Mutual Fund Styles," Journal-of-Financial-Economics; 43(3), March 1997, pages 373-99.
• Gerald W. Buetow et al. "The inconsistency of return-based style analysis," Journal of Portfolio Management, vol. 26(3), Spring 2000, pages 61-77.

• William N. Goetzmann and Massimo Massa, 1999, "Index Funds and Stock Market Growth," INSEAD working paper.

• Sara Calian, "Fund Firms Build Brand Buzz," WSJ Europe, Feb. 8th, 2001.

Session 13. The Vanguard Group Case and Fidelity Magellan Case (Feb. 20th)

The case is due at 10:15 am on Tuesday, Feb. 20th.

• Questions will be emailed in advance.

Session 14. Behavioral Finance and Investments (Feb.21st)

Slides are here 

• Prospect Theory

• Overconfidence

• Framing

• Investor Sentiment

• Implications for Investment Industry

• XBrad Barber and Terrance Odean, "The Courage of Misguided Convictions," Financial Analysts Journal, 1999, 41-55. 
• Robert J. Shiller, "Human Behavior and the Efficiency of the Financial System," in Handbook of Macroeconomics (John B. Taylor and Michael Woodford, editors)
• William Goetzmann, Massimo Massa and Geert Rouwenhorst, Behavioral Factors in Mutual Fund Flows Yale University Working Paper, 2000. 
• Mark Hulbert, "How Dot-Com Makes a Company Smell Sweet", NY Times, Aug. 15, 1999
• EXTRAAndrei Shleifer, Inefficient Markets: An Introduction to Behavioral Finance, Oxford University Press, 2000.

 (PROBABLY will not be discussed in Class. Case is due on Feb. 27th)

• Questions will be emailed in advance.

Slides are here 

• Statistical hedging
• Dynamic Asset Allocation 
• Portfolio Insurance
• Metallgesellschaft Story

Readings:

• X BKM Chapter 27.
• Mark Rubinstein and  Hayne E. Leland, "Replicating Options with Positions in Stock and Cash," Financial Analysts Journal, Charlottesville; Jul/Aug 1981; Vol. 37(4), pages 63-72.
• X Mark Rubinstein, "Alternative Paths to Portfolio Insurance," Financial Analysts Journal, Charlottesville; Jul/Aug 1985; 41(4); pages  42-52.
• Christopher L. Culp and Merton H. Miller "Metallgesellschaft and the Economics of Synthetic Storage," Journal of Applied Corporate Finance, Winter 1995, 7(4), pages 62-76. 
• Franklin R. Edwards and Michael S. Canter, "The Collapse of Metallgesellschaft: Unhedgeable Risks, Poor Hedging Strategy, or Just Bad Luck?," Journal of Applied Corporate Finance, Spring 1995, 8(1), pages 86-105. 
• EXTRA Bruce I Jacobs, Capital Ideas and Market Realities. Option Replication, Investor Behavior, and Stock Market Crashes, Blackwell Publishers, 1999.

• Bond Prices and Yields
• Term Structure of Interest Rates
• Risk Structure of Interest Rates
• Duration, Convexity and Interest Rate Risk

Readings:

• X BKM Chapters 14-16.
• "Notions about Notionals" Risk Magazine, March 1994.

Due on March 5th:  Hermes Case.

Investment project is due March 26th !