University of Texas at Dallas

Instructor: Vira Holovchenko

Office Hours: Wednesday 2:00 pm - 4:00 pm or by appointment
Office Number: GR. 3.412
Email: verah@utdallas.edu

ECO 4396-001 INVESTMENTS

Fall 2005
Course/Number/Section Day Time Room
ECO 4396-001 MW 12:30-1:45pm SOM 2.717

Course Overview

This course is an introductory investment class for students who have relatively little familiarity with investments.
It examines a range of issues focusing on both portfolio management while covering a significant amount of
portfolio theory and on fundamenta l analysis of equity valuation. The course objective is to introduce students to
the major issues currently of concern to all investors and provide with the skills to conduct a sophisticated
assessment of current issues and debates covered by both the popular media as well as more specialized finance
journals. Topics to be covered during the semester include trading, valuation, security analysis, active portfolio
management, risk and return theory, asset allocation, global diversification, performance measurement, financial
derivatives, and fixed income securities.

Prerequisites

This course assumes prior knowledge of microeconomics and macroeconomics as well as some basic techniques for
economic research. Prerequisites: ECO 3304 Basic Techniques for Economic Research, ECO 3310 Intermediate
Microeconomic Theory, ECO 3311 Intermediate Macroeconomic Theory

Text

The following textbooks are available at both college bookstores (on-campus and off-campus).
1. “Fundamentals of Investments: Valuation and Management” by Charles J. Corrado and Bradford D. Jordan
(CJ)
2. “Essentials of Investments” by Zvi Bodie, Alex Kane, and Alan J. Marcus (BKM)

Course Meetings

The course meets on Mondays and Wednesdays from 12:30-1:45 p.m. in SOM 2.717.

Office Hours

If regular office hours (posted above) do not work for a student, he or she is encouraged to contact an instructor via
email or WebCT to set up an appointment for another time. Students are strongly recommended to come see an
instructor throughout the semester to discuss questions about the material, their progress in the class, or the
economics minor or major. Since an instructor’s goal is to help students in their learning, it is expected from them
to have made a reasonable effort to understand the material on their own before they come to talk to the instructor
about it.

Attendance

Students are expected to be diligent in the pursuit of their studies and regular in their attendance. Attendance is not
mandatory. However, attending class regularly is highly recommended and student roll is going to be collected each
time. Attendance is going to be taken into account for students with borderline grades. Also, students are
responsible for the announcements made in class.

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Exams

This class will have one midterm and a final. No makeup exams will be given. If a student misses an exam, he or
she will receive a zero for this exam. There are no exceptions. Midterm is worth 25 points and final is worth 35
points of student’s final grade. Final exam is comprehensive. Both exams will be based on the lecture material and
required readings. Required readings will be approximately 1-2 chapters per week. The students have to read the
material at least once before class.

Classroom Conduct

Students are expected to be attentive during class and to listen respectfully to the instructor and to other students
when speaking. Disruptive students will be asked to leave the classroom and could be subject to disciplinary
proceedings.

Cell Phones and Pages

Students are expected to turn off their phones and pages during class.

Accessibility

If any student has a condition that requires accommodation in this course, please speak with the instructor after
class or in office hours during the first week of class. Appropriate accommodations will be granted provided timely
notice is received and the arrangement is consistent with any recommendations from the Disability Services, when
applicable. Disability Services can be reached at 972-883-2098. The syllabus and other course materials can be
made available in alternative formats.

Grading Policy

Grades will be based on quizzes, portfolio simulation report, midterm, and final exam. Students will be assigned
chapter problem sets. But they are not required to turn in their homework. However, it is strongly recommended to
do all the assignments before the answers are posted online. Both midterm and final are closed notes and closed
book. Please notify the instructor in the first week of the course about any foreseeable conflicts with the midterms
and final (e.g., 3 tests on same day). After this, make-ups will be allowed only for serious medical or personal
problems and a note from a doctor is required. Class participation is not graded, but is essential for your
understanding of the material and for successful and fun in-class discussions and exercises. Please come to class
prepared to participate.

Final Grade:

Class Quizzes (10 out of 12 quizzes) 20%

Each quiz is worth 2%
Portfolio Simulation Report 20%
Midterm 25%
Final 35%

WebCT

WebCT is used in this class primarily for communication between students and the instructor. Also, lecture notes,
homework assignments, problem set keys, quiz keys, and student grades will be regularly posted in WebCT. If a
student does not have a computer at home or prefers to work on campus, he or she may do this at the library or in
the many computer labs on campus. If anyone is unfamiliar with WebCT, the following website should be used for
directions: http://www.utdallas.edu/distancelearning/students/webct_login.htm.

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Assignments

Students will be given homework assignments throughout the semester. These assignments will not be collected by
the instructor. However, it is highly recommended to do all assigned problems before quizzes since all problem sets
are assigned to help the students learn the requirements and expectations for upcoming quizzes and exams.

Portfolio Simulation Report

Each student is required to help manage a portfolio. Students must work in teams consisting of no more than four
members and not less than two members. Each team needs to register for an account with Stock-Trak (by email or
internet). The cost of each account is free with the purchase of Corrado & Jordan textbook. Each chapter in the
textbook has practice problems designed for Stocktrak account. Account activity can be monitored at
www.stocktrak.com. Each team is responsible for keeping all records required to track their weekly performance
including prices of all the securities. Stocktrak does not have build-in feature of keeping weekly records.

Each team must provide a “team roster” by August 31. Portfolio must include long positions in at least 10 but not
more than 20 stocks, also at least one option position of 10 or more contracts and one put option of 10 or more
contracts. No more than 20 percent of the portfolio should be invested in any one security.

The performance evaluation report for each team is due on November 16. The report should not exceed four
double-spaced pages (excluding exhibits); including a weekly appraisal of portfolio risk and an estimate of the
portfolio’s risk-adjusted performance. The term needs to provide explicit comparison of its portfolio’s risk and
return for both the market and its performance benchmark. Again, weekly portfolio performance should be
monitored closely. The grade will be based on the quality of the performance evaluation and not on the portfolio’s
actual performance. But each member of the team with the best risk-adjusted performance will get extra 3-point
bonus.

Chartered Financial Analyst (CFA)

This course is consistent wit h that of the Institute of Chartered Financial Analysts (ICFA). The ICFA administers
an education and certification program to candidates for the title of Chartered Financial Analyst (CFA). The CFA
curriculum represents the consensus of a committee of distinguished scholars and practitioners regarding the core of
knowledge required by the investment professional. ECO 4396 Investments class incorporates and uses a wide
range of problems from different years of CFA exams of all three levels.

This syllabus is tentative and subject to change

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 COURSE OUTLINE

1. Risk and Return (CJ Ch. 1, BKM Ch. 5 (pp. 130-146))

a. Dollar Return vs. Percentage Return

b. Return average and variability estimation
c. Arithmetic vs. Geometric averages

2. Elements of Investment

a. Investment: Background and Issues (BKM Ch.1)

b. Security Types (BKM Ch. 2.1-2.3, 2.5, CJ Ch.3)
c. Stock market and Stock market Indexes (CJ Ch 5, BKM Ch. 2.4)
d. Trading Securities (CJ Ch. 2, BKM Ch. 3)
e. Mutual Funds and Other Investment Companies (CJ Ch. 4, BKM Ch. 4)

3. Efficient Diversification (CJ Ch. 11. BKM Ch. 6)

4. Capital Asset Pricing and Arbitrage Pricing Theory (CJ Ch. 12, BKM Ch. 7)

5. Performance Evaluation and Risk Management (CJ Ch. 13, BKM Ch. 20)

6. Derivative Market

a. Stock Options (CJ Ch. 14, BKM Ch. 14)

b. Option Valuation (CJ Ch. 15, BKM Ch. 15)
c. Futures Market (CJ Ch. 16, BKM Ch. 16)

7. Common Stock Valuation (CJ Ch. 6, BKM Ch. 12)

8. Bond Valuation

a. Bond Prices and Yields (CJ Ch. 10, BKM Ch. 9)

b. Managing Bond Portfolios (BKM Ch. 10)

9. International Investing (BKM Ch. 21)

Note: This course outline is tentative and subject to change.