Capital Markets (SFI)
The course assumes some knowledge of basic economic concepts such as: prices, returns, demand, and supply. Also, one needs to be familiar with the mathematical concept of maximization/minimization of a function. Some knowledge of statistics is required too. In particular, you will need to know about mean, variance, covariance, and correlation of random variables. Also, we will refer extensively to the normal probability distribution. All these concepts will be reviewed during the practical sessions.
The course is an introduction to the institutions and economic functioning
of capital markets. First, the course provides a general description of
the basic features of these markets: the asset classes, the trading mechanisms,
and the main actors. Then, it deals with individual portfolio choice.
Next, individual portfolios are aggregated to derive the main concepts of equilibrium in equity markets (CAPM, APT). These concepts are used to introduce the notion of market efficiency. The empirical evidence on market efficiency is discussed and analyzed from the point of view of classical and alternative theories of capital markets, such as Behavioral Finance.
As a new chapter, the course deals with fixed income securities (prices, yields, the term structure, and bond portfolios management). The course then examines the tools that financial analysts use to make investment decisions (macroeconomic and equity analysis). Finally, all the notions developed during the course are used to study applied portfolio management. In this context, the tools to analyze the performance of different types of investment funds are introduced.
List of Topics
Equilibrium in Capital Markets
Active Portfolio Management
Z. Bodie, A. Kane, A.J. Marcus, Investments, McGraw Hill, 2008. 7th edition.
The relevant chapters will be announced in class.