Lebow College of Business

Drexel University
Finance 626 Professor Wes Gray
Investment Management Academic Building 209
Spring 2011 wgray@drexel.edu
Matheson 208 773-230-4727
http://faculty.lebow.drexel.edu/grayw

Syllabus for Finance 626—Investment Management

1. Introduction

1.1. Course Description: This course is designed to provide a sound foundation of the fundamental
concepts in investments. Students who master the course material will acquire the analytical tools
and financial theory necessary for making good investment and asset allocation decisions.

*** A primary goal of the course is to provide an opportunity to complete realistic tasks an
employer may expect you to complete. The course is CHALLENGING and a few problem sets
may take up to 10 hours to complete depending on your level of experience. If you do not have the
prerequisites for this class, please DO NOT TAKE THIS CLASS.

1.2 Prerequisites: The course requires an intermediate level of finance knowledge. This course is
highly quantitative and relies heavily on analytical tools and economic theory developed
throughout the course. Students should be comfortable with probability, statistics, and regression
analysis. Use of a spreadsheet package such as Excel will be vital for the homework assignments.
Some use of calculus and linear algebra may also be required (familiarity with these concepts is
helpful, but not required).

1.3 Grade Curve: Grades in this class are 100% transparent, so students can honestly assess their
performance against their peers. The class will be graded on a curve where the average class grade
will be a B+ (3.30 curve).

2. Course Requirements and Grading

The course requirements are a final exam, five graded homework assignments, and a presentation.
Your course grade will be determined by the following table:

Grading Schedule
Class Participation 5%
Weekly Market Report Presentation (1 per group) 10%
Problem Sets (5, top 4 graded) 15%
1-page Intelligent Investor Professional Report 10%
Final 60%

2.1. Class Participation: Class participation consists of the following:

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  Weekly Market Update Presentation peer review forms (see above)
 Classroom attendance (not showing up to class will influence your participation grade!)
 Prepared for class
 Engaged in classroom discussion

Your behavior should respect your classmates' desire to learn. Each lecture begins exactly at 6:00
p.m. and ends around 9:00 pm. I understand your busy schedules, but try to be on time. If you carry
a cell phone or any other type of `audible alert device', turn it off before entering class. Do not
engage in side conversations and debates during the lecture. If you must come late, please let me
know beforehand.

2.2. Weekly Market Report Presentation: Starting in the 3rd week, each group will be required
to present (1) 20 minute “Weekly Market Update” presentation. The presentation will cover the
following topics (this is a guideline only; you may present the material in any sensible way):

 Global News
o What were the past week’s headlines? How will they affect various markets? What
assets should we buy/sell? Why?
 Economic Indicators (domestic focus)
o Description of each indicator and its relevance to the market
o How did the markets react? Why? Do you agree with the reaction?
 Stock Market Recap (domestic focus)
o How did the indices perform? Why?
o What individual companies made news? How did it affect the market?
 Bond Market Recap (domestic focus)
o How did various bond markets perform? How will this affect the economy?
o What does the yield curve look like? Why?

Following the presentation, selected students in the audience will be required to complete a “peer
review” form with constructive feedback on the student presenters’ performance (one form per
presenter).

2.3. Problem Sets: Five problem sets will be given, which consist of problems and several
applications to real data. The latter are designed to apply techniques learned in the course to real
data in a manner similar to what might be applied in practice. Keep in mind that exam questions
will be similar to the assigned homework problems. In determining your final grade for the
problem sets, I will only count your best four problem sets. You may do the problem sets and
presentations in groups that are not to exceed four people. Problem set answers (and honor code
attestation) must be submitted hard-copy to the TA at the start of class. Supporting problem set
materials must be submitted electronically to the TA before class. Late problem sets will not be
accepted.

2.4. Exams: The final exam tests your understanding of the key concepts in the class. The final
does not test your ability to memorize or how to use your calculator. Rather the test will probe your
deeper understanding of the material. As a result, the final may be more challenging than the
exams you are used to. To prepare for this exam, you should work through the problem sets,
review the lecture slides together with your own class notes, the required readings, the sample
exams, and preferably the suggested problem sets and suggested readings (in that order of
importance). The final exam is cumulative.

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You will be allowed two double-sided pages of notes at the final exam. The sheets must be no
larger than 8.5 inch by 11 inch. There are no restrictions on the content of the formula sheets. You
will be asked to turn in these formula sheets after the final exam. No laptops or smart-phones are
allowed on the exams. Calculators are permitted.

2.5. Professional Report: You are required to read “The Intelligent Investor” by Benjamin
Graham. I require this reading to ensure that our academic discussions filled with equations and
theories are balanced out by a healthy dose of common sense. I require a 1-2 page professional
memo outlining 1) the key learning points from the text, and 2) an outline of a trading strategy
discussed in the book (pretend you are writing this for your boss in a workplace setting).

2.6. Honor Code: You are responsible for maintaining Drexel's Honor Code which mandates zero
tolerance for cheating and plagiarism. Violations of the honor code will be prosecuted with a
minimum penalty of failure for the course, as required by code of conduct rules. If you become
aware of any violations of the honor code you must take whatever steps are necessary to stop the
violators. You must include a signed statement at the top of each problem set and exam, indicating
that you adhere to the honor code. The statement is: `I pledge my honor that I have not violated the
Drexel Honor Code in the completion of this exam/problem set.' It is in your best interest that the
market place knows that Drexel takes honesty seriously; it adds to the value of your degree.

2.7. Group Work Guidelines: You will be allowed to work on the problem sets and presentations
in groups of three to four people. Groups must be determined by the beginning of the second class
and cannot change throughout the quarter. You should discuss the problems and presentations only
with members of your problems or presentation groups, respectively. In the future, you should not
discuss the problem sets with students taking Finance 626. In the end, a majority of your grade
(e.g., final exam) is based on your individual efforts so it is in your best interest to learn the
material and not to free-ride on your group members.

Group sign-up can be completed at the following link:

https://spreadsheets.google.com/ccc?key=0AjJBfJ0Yq2btdGNBdk5qekRvWWNUcDNIX1RkbjJ
nN3c&hl=en&authkey=COv1xO0F#gid=0

3. Readings
3.1 Handouts: Prior to each class I will post an information sheet with the following information:
 Handouts for the day
 Topics for the day
 Readings for the day
 To-do for the next class

3.2. Recommended Textbook: The textbook for this class is:

[1] “Investments" by Zvi Bodie, Alex Kane, Alan J. Marcus, 8th edition

Required reading:
[2] “The Intelligent Investor" by Benjamin Graham, any edition

You will mainly use [1], abbreviated BKM. If you have an earlier edition of BKM (fifth, sixth, or
seventh), you are fine (older editions are typically cheaper). There are only minor changes between

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editions. Page and chapter numbers may vary slightly. BKM is available at the university
bookstore or any online bookseller. The textbook is optional, but recommended.

3.3. Lecture Slides: Lecture slides will be posted in advance on the class web page. You will need
to print these out and bring them to class with you. The lectures slides provide an outline of the
course discussion and some detail on the topics covered. They are not a substitute for attending
class since the class discussion will add value to the notes and texts. Simply reviewing the lecture
slides and text material will not be sufficient to succeed in the course.

3.4. Assigned Readings: I will sometimes assign readings and/or notes which are relevant to the
lecture. You are responsible for reading and understanding these assigned readings. These
readings will be provided via the course website.

3.5. Current News: You are encouraged to follow financial and macroeconomic news in the
Financial Times, Wall Street Journal, or The Economist. If you encounter an interesting article that
you would like to share with the class, send me an email and I will post it on the class site.

4. Exam Office Hours, Office Hours, Class Material, and TA

4.1. Exam Office Hours: The TA and I will hold extended office hours before exams.

4.2. Office Hours: I will hold office hours Tues 1300-1500. Students who have questions or want
to review previous material are encouraged to come to my office hours. If you would like to
schedule an individual appointment for another time, please feel free to call or send me an email.
My goal is to respond to every question within 24 hours. The TA will hold office hours in
Academic Building 216 Wed 1230-1330.

4.3 Class Material: The class web site will be posted on Blackboard at
http://drexel.blackboard.edu/. This is the central location where all teaching materials are posted.
Class announcements will be posted here. Problem sets will be posted there as well. Solutions to
the problem set will be posted no later than one week after the due date; they will not be distributed
in paper form in class.

4.4. Teaching Assistant: John (Jack) Vogel, jrv34@drexel.edu.

5. Course Outline
5.1 Detailed Outline: Below is a schedule with topics for the course. More than one topic will
typically be covered during a class session (bring coffee!).

Week 1
Topics: Statistics, finance boot camp
Required Readings: BKM Chapters 1-5, and Statistics Overview.

Week 2
Topics: Fixed Income
Required Readings: BKM Chapters 14-16.

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Week 3
Problem Set #1 due at the beginning of class
Weekly Market Report #1
Topics: Fixed Income (cont), Asset Allocation, Portfolio Mathematics
Required Readings: BKM Chapters 6-7.

Week 4
Problem Set #2 due at the beginning of class
Weekly Market Report #2
Topics: Asset Allocation, Portfolio Mathematics
Required Readings: BKM Chapters 6-7.

Week 5
Weekly Market Report #3
Topics: Mean Variance Analysis, Capital Asset Pricing Model
Required Readings: BKM Chapter 7-9.

Week 6
Problem Set #3 Due at the beginning of class
Weekly Market Report #4
Topics: Mean Variance Analysis, Capital Asset Pricing Model
Required Readings: BKM Chapter 7-9.

Week 7
Problem Set #4 Due at the beginning of class
Weekly Market Report #5
Topics: Forwards and Futures, Guest Speaker: Mitch Pinheiro
Required Readings: BKM Chapter 20, 22, 23

Week 8
Intelligent Investor Professional Memo Due
Weekly Market Report #6
Topics: Forwards and Futures, Introduction to Options (Cont.)
Required Readings: BKM Chapter 20, 22, 23

Week 9
Problem Set #5 due at beginning of class
Weekly Market Report #7
Topics: The Limits of Arbitrage, Behavioral Finance
Required Readings: BKM Chapter 12, “Survey of Behavioral Finance.”

Week 10
Weekly Market Report #8
Topics: Market Efficiency and Anomalies, Final Preparation
Required Readings: BKM, Chapter 11-12, 24, “What has Worked in Investing.”

Week 11
FINAL EXAM

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