Department of Economics NUML, Islamabad

Investment Analysis and Portfolio Management

COURSE OUTLINE
Course: Investment Analysis and Portfolio Management
Course Code: ECFN-302
Credit Hours: 3
Program: BS Economics & Finance/Economics (6th Semester)
Instructor: Dr. Nosheen (dr.nosheen@numl.edu.pk)

COURSE DESCRIPTION:
This course is intended to introduce the concepts and tools of security analysis and portfolio management. The course
content covers market structure and trade execution, client characteristics and their effect on portfolio construction,
the asset allocation decisions, the security allocation decisions by considering the risk and return, market efficiency
and trading strategies. In addition, selected topics related to portfolio risk management and portfolio performance
evaluation will be discussed. Course is prepared keeping in view the continuous rapid changes in the securities
markets in terms of theory, new financial instruments, innovative trading practices, and the fallout from the
significant credit and liquidity disruption and the numerous regulatory changes that followed.

COURSE OBJECTIVES:
The objective of the course is:

1. To study theory and empirical evidence relevant for portfolio management.

2. To understand how an investment professional would allocate funds in a hypothetical portfolio.
3. To estimate capital market parameters, trade-off between risk and return, optimal portfolio selection, equilibrium
asset pricing models, and delegated portfolio management.
4. To put emphasis on development of techniques that should be part of the tool kit of those interested in becoming
professional investors.

COURSE LEARNING OUTCOMES (CLOs):

On successful completion of this course, students will be able to:

CLO1: Understand investment analysis and portfolio management principles and theories.

CLO2: Apply quantitative techniques for investment opportunity analysis.

Handbook (fall 2023-fall 2024)
Department of Economics NUML, Islamabad
CLO3 Evaluate investment instruments and strategies.

CLO4 Construct and manage investment portfolios.

CLO5 Assess and manage investment risk.

CLO6 Understand ethical and professional considerations in investment analysis. Use and explain the underlying
principles, terminology, methods, techniques and conventions used in the subject.

TEACHING METHODOLOGY:
1. Three hours of lectures per week
2. In-class activities (quizzes, presentations, discussions, in class activities etc.,)
3. Written assignments and projects.

RECOMMENDED TEXT AND REFERENCE MATERIAL:

Required Text:
“Investment Analysis and Portfolio Management” by Frank K. Reilly and Keith C. Brown.

Recommended:

Investment (5th E) by Robert C. Radcliffe.

Investments Analysis and management (10th Ed) by Charles P. Jones.

COURSE EVALUATION/ASSESSMENT SYSTEM:

End term Exams 50% Duration: 03 Hours 50

Midterm Exams: 30 % Duration: 02 Hours 30
Internal Evaluation: a) Quizzes (5-10%) 20
20% b) Assignments: (5-10%)
c) Project/Presentation/Technical Report (5-10%)
d) Before Midterm Exams: 2 Quizzes – 2 Assignments.
e) After Midterm Exams: 1 Quiz –1 Assignments – 1 Project
presentation

Total Marks 100

Handbook (fall 2023-fall 2024)

Department of Economics NUML, Islamabad

WEEK WISE SYLLABUS WITH THEIR CONTRIBUTION TO CLOs:

Assessment
Lecture Scheduled Topic CLO
Activity
01 The Investment Setting
 The Investment Setting
CLO 1
 Revisions of Finance basics
 What is an investment?

02 The Investment Setting

CLO 1
 Investments: background and issues
 Measuring risk and return
 Measures of historical/expected rates of
return
03 Risk measures for historical/expected returns CLO 5
 Standard Deviation
 Variance Coefficient of Variation
04 Determinants of required rates of return
 Nominal and real risk free rate CLO 5
 Risk premium
 Risk Premium and portfolio theory
05 Relationship between Risk and Return
 SML line CLO 5
 Changes in the SML line

06 The Asset Allocation Decisions

 Individual Investor Lifecycle Assignment 1 CLO 1,2
 The Portfolio Management Process
Quiz 1
 The need for Policy Statement
 Input to the Policy Statement
07 The Asset Allocation Decisions
 The importance of asset allocation CLO 1,2
 Objectives and Constraints of Institutional
Investors
08 Setting investment in a Global Market
 The case for global investments CLO 1
 Global Investment Choices
 Fixed-Income Investments
 Equity Investments
09 Special Equity Instruments
 Options CLO 3
 Futures Contracts
 Historical Risk and Return on Alternative
Investments

Handbook (fall 2023-fall 2024)

Department of Economics NUML, Islamabad
10 Organization and Functioning of Securities Markets CLO 3
 What is Market?
11 Types of Markets
 Money Vs Capital Markets
 Primary Vs Capital Markets CLO 3
 Debt Vs Equity Markets
 Regional exchanges and the over-the-
counter market
12 Types of Markets
 Detailed Analysis of Exchange Markets Assignment 2 CLO 2
 How Securities are traded
 Types of Orders
 Changes in the Securities Markets
13 Security Market Indicator Series
 Uses of Security Market Indexes CLO 2
 Differentiating Factors in Constructing Market
Indexes
14 Stock Market Indicator Series
➢ Value-Weighted Series CLO 3
➢ Price-Weighted Series
➢ Un-weighted or Equal-Weighted Series
15 Bonds Market Indicator Series Quiz 2
➢ Investment Grade Bonds CLO 3
➢ Junk Bonds
➢ Annual security risk-returns and correlations
➢ Comparison of Indexes Over Time
16 Efficient Capital Markets
 Why should capital markets be efficient? CLO 3
 Alternative efficient market hypotheses
 Implications of efficient capital markets
17 Tests and results of efficient market hypotheses
 Weak form hypothesis: Tests and results CLO 2
 Semi-strong form hypothesis: Tests and results
 Strong form hypothesis: Tests and results
18 An Introduction to Portfolio Management CLO 4
 Background assumptions
 Markowitz portfolio theory
19 Introduction to Portfolio Management CLO 4
 Measuring risk and return
 Expected return for individual investment
20 Introduction to Portfolio Management
 Expected return for a portfolio Assignment 3 CLO 4
 Variance and standard deviation of return for an
individual investment
21 Investor Utility
 More than two assets portfolio and estimation
issues
CLO 4
 The efficient frontier
 The efficient frontier and investor utility

Handbook (fall 2023-fall 2024)

Department of Economics NUML, Islamabad

22 An Introduction to Asset Pricing Model CLO 3

 Capital market theory: An overview
 Risk-free asset
23 An Introduction to Asset Pricing Model
 Market portfolio Quiz 3 CLO 3
 The Capital Asset Pricing Model: Expected
return and risk
24 Relaxing the assumptions of CAPM
 Differentiating borrowing and lending rates CLO 5
 Transaction costs
 Heterogeneous expectations and planning periods
 Taxes
25 Multifactor models of risk & Return CLO 5
 The market portfolio: theory versus practice
26 Multifactor models of risk & Return
CLO 5
 APT and its Uses Project
 Other Multi factor Models
27 Evaluation of Portfolio Performance
CLO 6
 Significance of Evaluation of Portfolios

28 Evaluation of Portfolio Performance

 Sharpe’s Measure CLO 6
 Treynor’s Measure
 Jensen Alpha

Handbook (fall 2023-fall 2024)