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BFB4123/BAFB4123
INVESTMENT ANALYSIS
(Conventional Mode)
Pre-Requisite :
BFB3013/BAFB3013 Financial Management
Semester : September 2014
Course Leader : Latifah Abdul Latiff
Office Location : Faculty of Business and Information Technology, UNITAR International
University, Level12, Wing A, Jalan SS3/6, Tierra Crest, Kelana Jaya, 47301
Petaling Jaya, Selangor Darul Ehsan
Consultation Hours : Monday 3.30pm 5.30pm
Tuesday 3.30pm 5.30pm or by appointment
Telephone : 03-7627 7477 (O)
E-mail : latifah@unitar.my
Course Synopsis
This course will introduce the students to capital markets, money markets etc. The differences among
these markets will be highlighted. This course will help the students to understand the characteristics of
different financial assets like shares, bonds, mutual funds and derivatives. They also will be taught how
to compute the return, risk and value of each instrument with traditional tools like charts and highly
mathematical models like Markowitz portfolio theory, CAPM and Macaulay duration etc. They will be
asked to construct portfolios of their own with real time data from Bursa Malaysia and quantify return,
risk and value. The students will be exposed to real time data and will be taught how to download,
process and extract information for deciding when to buy, hold and sell these instruments.
Course Objectives
The banks and financial services industry require manpower with knowledge and skills in managing the
investments especially in financial assets. This segment of business grows fast and it requires intensive
mathematical analysis of parameters like return, risk and value in standalone and in portfolio contexts.
With this aim in mind this course is designed to train students in capital market instruments like shares,
bonds, mutual fund units and derivatives. After completion of this course the stunts can join a variety of
organizations like banks, institutional investors like provident fund and insurance companies. They can
also become investment analysts and consultants in individual financial planning.
Learning Outcomes
At the end of the course, the student should be able to:
1. Describe the market, money market and other markets and the transactions involved.
2. Assess investment return, risk and value of any financial asset in standalone and in portfolio
context.
3. Analyze financial instruments such as mutual funds, bonds and derivatives and its application in
investment.
4. Construct Portfolios of shares, bonds, derivatives and mutual funds.
5. Apply traditional techniques like charts and graphs to forecast the price movements to decide
when to buy and sell the financial assets.
2
Required Materials
Mayo Herbert B., Introduction to Investments, South-Western Cengage Learning International Edition,
10
th
Edition 2011.
Optional/Additional Materials
Bodie Zvi, Kane Alex and Marcus Alan J., Essentials of Investments, McGraw-Hill International Editions,
8
th
Edition,2010.
Course Assessment
Assignment
50%
Final Examination 50%
Total 100%
Course Requirements & Policies
You are expected to fulfill the following requirements of the course to obtain a grade:
Attendance
Students are strongly encouraged to attend all the face-to-face meetings scheduled for the
semester. Any students that did not attend at least 70% of the scheduled meetings could be barred
from sitting the final exam. Punctuality is equally important.
Please dress decently and appropriately (according to universitys dress codes) when attending
classes.
Participation
Students are required to participate actively in class discussion, exercises and other class activities.
It is just not enough to read and study the lectures given by the instructor, or to participate mentally
in the discussion without voicing out your opinions or relating your own experiences. Students are
expected to read the topics before coming to class to facilitate their understanding of the subjects
and in the discussion.
Assignments
There will be individual and group assignments. Details of the assignments for this semester will be
posted later.
Final Examination
The final exam will be covering selected topics. The duration of this exam is 3 hours. You will be
examined on your level of understanding and knowledge acquired in this course.
Industry Linkages
Guess speaker from the finance industry to discuss issues pertaining to finance/economy area.
Additional remark:
M.C. for the final exam has to be given to the exam unit.
Examination Format
The format of the final examination:
There are SIX (6) problem solving and essay type questions. Answer FIVE (5) only
The duration of the examination is 3 hours.
3
Study Plan
Week Dates Mode Readings Learning
Activities
Remarks/Deadlines/
Evaluation
1
15/9 21/9
FTF
Introduction
a. Investments: Background and Issues
b. Financial Markets and Instruments
c. How Securities are Traded
Discussion , Class
exercises
2
22/9 28/9
FTF
Risk and Return
a. Risk and risk premium
b. Asset allocation across risky and risk-free
portfolios
Discussion , Class
exercises
3
29/9 5/10
FTF
Risk and Return
a. Passive strategies and the capital market line
b. Efficient Diversification
c. Diversification and portfolio risk
Discussion , Class
exercises
4
6/10 12/10
FTF
Risk and Return
a. Asset allocation with two risky assets
b. The optimal risky portfolio with risk-free asset
c. Efficient diversification with many risky assets
Discussion , Class
exercises
5
13/10 19/10
FTF
Capital Asset Pricing and Arbitrage Pricing Theory
a. The Capital Asset Pricing
b. The CAPM and index
c. The CAPM and the real
d. Arbitrage Pricing Theory
Discussion , Class
exercises
4
Week Dates Mode Readings Learning
Activities
Remarks/Deadlines/
Evaluation
6
20/10 26/10
Mid-Semester Break
7
27/10 2/11
FTF
Efficient Market Hypothesis
a. Random Walks and the Efficient Market
Hypothesis
b. Implications of the EMH for investment policy
c. Are markets efficient?
Discussion , Class
exercises
8
3/11 9/11
FTF
Bond Prices and Yields
a. Bond characteristics
b. Bond risks
c. Bond pricing
d. Bond yields
Discussion , Class
exercises
9
10/11 - 16/11
FTF
Bond Prices and Yields
a. Bond valuation
b. Bond risk- duration
c. Bond convexity
Discussion , Class
exercises
10
17/11 23/11
FTF
Managing Fixed-Income Investment
a. Interest rate risk
b. Passive bond management
c. Active bond management
Discussion , Class
exercises
11
24/11 30/11
FTF
Macroeconomic and Industry Analysis
a. Domestic and global economy
b. Government policy
c. Business Cycle
Discussion , Class
exercises
5
Week Dates Mode Readings Learning
Activities
Remarks/Deadlines/
Evaluation
d. Industry Analysis
12
1/12 7/12
FTF
Equity Valuation
a. Balance sheet valuation method
b. Intrinsic value versus market price
c. Dividend discount model
d. Price earnings ratios
Discussion , Class
exercises
13
8/12 14/12
FTF
Futures Market
a. Forward versus future
b. The futures contract
c. Mechanics of trading in futures
d. Futures pricing
Discussion , Class
exercises and
presentation
14
15/12 21/12
FTF
Options Market
a. The option contract
b. Options trading
c. Valuation of option at expiration
Discussion , Class
exercises
15
22/12 28/12
FTF Revision
16&17
29/12 11/1
Final Examination