Syllabus academic year 2011/2012
(Created 2011-09-01.)
PORTFOLIO SELECTIONEXTF35
Credits: 7,5. Grading scale: TH. Cycle: G2 (First Cycle). Main field: Technology. Language of instruction: The course will be given in Swedish. EXTF35 overlaps following cours/es: NEKH81, NEKK11 and TEK030. Optional for: I4. Course coordinator: Erik Norrman, erik.norrman@nek.lu.se, Department of Economics. Prerequisites: Basic statistics. Assessment: Tuition consists of lectures, discussions and computer exercises. Assigned readings are an integral part of the teaching methods. The examination consists of computer-based assignments and a written examination covering the reading materials and lectures. Each part of the examination must be passed. The written exam takes place at the end of the course. There will be further opportunities for examination close to this date. Other forms of examination may be used to a limited extent. Home page: http://www.nek.lu.se/GU/GUB.asp.

Aim
The aim of the course is to provide a firm understanding of portfolio theory and investment analysis.

Knowledge and understanding
For a passing grade the student must

have demonstrated a knowledge of portfolio theory and investment analysis, with particular emphasis on:

· the mean-variance model, especially ability to explain and critically appraise how the optimal portfolio is identified with and without a risk-free asset,

· factor models, including both the single index model and multifactor models,

· equilibrium models, with emphasis on the standard capital asset pricing model and the arbitrage pricing model,

· the efficient market hypothesis, especially knowledge of, and explanations of anomalies and how to test for inefficiencies by event-studies,

· valuation models, including both single-period and multi-period growth models,

evaluation of portfolio management by benchmarking a well as by single parameter techniques.

Skills and abilities
For a passing grade the student must

have demonstrated an ability to independently:

· make calculations in order to construct a mean-variance efficient optimal portfolio by means of suitable software and empirical data,

· make calculations in order to construct efficient portfolios based on factor models,

· make calculations in order to test equilibrium pricing models such as the capital asset pricing model,

analyse and interpret the results of their own applied work and testing.

Judgement and approach
For a passing grade the student must

Students shall have developed the ability to pursue further studies in the subject and should be able to search for and evaluate information with a high degree of independence. Students shall also have developed the ability to individually write an empirically orientated essay.

Contents
This is a course in both theoretical and applied portfolio analysis. Topics covered include problems related to mean-variance theory, index models, equilibrium and arbitrage pricing models, theories about efficient markets, valuation and evaluation of portfolio management and investment analysis. The course aims at training students in using software in order to identify optimal portfolios under different market conditions.

Literature
Elton, Edwin J., Martin J. Gruber, Stephen J. Brown and William Goetzman (2010): Modern Portfolio Theory and Investment Analysis, eighth edition, John Wiley
Benninga, Simon (2008): Financial Modeling, third edition, MIT Press
Supplementary material