INVESTMENT ANALYSIS

45-811

Christine Parlour

Room 338

parlourc@andrew.cmu.edu

Tel: 268-5806

Course homepage: http://www.andrew.cmu.edu/course/40/811

This course is an introduction to portfolio management. In it, you will learn the major equilibrium theories of asset markets such as the CAPM, APT and factor models. An understanding of these models will allow you to organize data on asset returns and or forecast future asset return.

You will also study measures to evaluate an actively managed portfolio. As asset returns are random variables, it is difficult to determine if a manager has actually added value of if he was just luck. We will discuss the concept of market efficiency, that is if all relevant information is incorporated in prices. How you evaluate this debate will determine your portfolio management style.

We will also discuss the fundamentals of the bond market: specifically the yield curve and how it can be used to price any fixed income security like swaps. We will also discuss immunization, which is a technique to protect your portfolio from changes in the interest rate. We will cover factor yield models and factor immunization.

Evaluation: There will be six assignments in this course and your final grade will be based on 40\% assignments and 60% final. Your assignment grade will be the average of your five best, because of this, late homeworks will not be accepted.