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University of Sri Jayewardenepura

Faculty of Management Studies and Commerce
MBA/MPM/MSc. in Management Program-2012
Year II/Term I

Course : MFI 6402: Investment Analysis and Portfolio Management

Course Lecturer : Dr. P D Nimal

Credits : 3 credits

Course Description:
This course is designed to acquaint the student with the concepts, theories and practices
in understanding, analyzing and making decisions in investment and portfolio
management. The course discusses understanding the market place, and principles for
analyzing, managing and valuing assets that include equity and fixed income securities.
The course provides some theoretical background in explaining investor behavior and
discusses the importance of portfolio investment and the theories and empirical findings
that explain the relationship between Risk and Return of investments. Further this
emphasizes on how the performance of investments be evaluated and how the risk of
investments be hedged. This will also make use of relevant computer based calculations
to link theory and practice.


Learning Outcomes:
On satisfactory completion of this course students should be able to:
Understand the important theories and their implications, applications and
empirical evidence in relation to the investment analysis and portfolio
management.
Identify and analyze available investment assets, their price behavior and the
relationship between risk and return of assets.
Understand the investor behavior.
Understand the Investment Process and Portfolio Management.
Understand the use of Financial Derivatives for hedging the risk of investments.








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Lesson Plan:
Week Date Lesson Readings Evaluation
01 04/01/2014
Introduction and the Valuation of
Riskless Securities
Ch. 1,2,3,
5 & HO-I

02 11/01/2014
Efficient Markets and Market Price Ch. 4 &
HO-II

03 18/01/2014
The Portfolio Selection Problem Ch. 6
04 25/01/2014
Portfolio Analysis
Capital Asset Pricing Model (CAPM)
Ch. 7,9 &
HO-III
Quiz I
05 01/02/2014
Excel based practical HO-V
06 08/02/2014
Empirical Evidence of the CAPM and
Factor Models and Arbitrage Pricing
Theory (APT)
Ch. 10,11
& HO-VI

07 15/02/2014
Fixed Income Securities, Bond Analysis
and Bond Portfolio Management
Ch. 13,
14,15 &
HO-VII


08
22/02/2014
Variable Income Securities, Valuation
of Common Stocks
Ch. 19,20
&
HO-VIII
Ind. Ass.
09 01/03/2014
Financial Derivatives and HO-IX
10 08/03/2014 Hedging the Risk of Portfolios HO-X
11 15/03/2014
Portfolio Performance Evaluation Ch. 24 &
HO-XI
Quiz II
12 22/03/2014
Guest lecture
13 29/03/2014
Group presentations
Gr. Ass.


Final Exam



Evaluation:
End-of-Semester Examination 50%
Continuous Assessments 50%
100% attendance 05%
2-quizess (at the end of 4
th
and 11
th
sessions) 10% each
One individual assignment 15%
One group assignment 10%


Continuous Assessment:
Quizzes: Two half an hour quizzes with 5-10 questions. Each quiz carries 10 marks.

Individual Assignment: This assignment is based on the Capital Asset Pricing Model.
Each Student must choose minimum of 10 stocks of the Colombo Stock Exchange that
can calculate monthly returns for at least last three years. Calculate monthly returns and
covariance matrix for the selected sample and draw the efficient frontier and plot all the
selected stocks and the ASPI on the same graph. Then Select an efficient portfolio with a
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certain riskfree rate and develop the CML and SML. Finally explain the use of the CML
and SML in deciding an investment by an individual depending on his/her risk preference.
Evaluation of the assignment will be done on the content and the quality of the
presentation of the report.

Group Assignment: Each group will be assigned to read an empirical research paper and
make a summery including the Research problem, Objective/s, Methodology, Data,
Findings and Conclusions. The report should be limited to maximum of 5 pages. Each
group has to make a maximum of 30-minutes oral presentation. Each member of the
group has to take part in the presentation.

Recommended Text:
1. Sharpe F. William, Alexander J. Gordan and Bailey V. Jeffery (2006), Investments,
6
th
edition, Prentice Hall.

Additional Readings:
1. Elton J. Edwin, Gruber J. Martin, Brown J. Stephen and Goetzmann N. William
(2003), Modern Portfolio Theory and Investment Analysis, 6
th
edition, John Willey &
Sons, Inc.
2. Benninga S. (2000), Financial Modeling, 2
nd
edition, the MIT press.
3. Hull C. John, (2008) Options Futures and Other Derivatives, 7
th
edition, Prentice Hall.
4. Various Journal articles and other reading materials will be distributed during the
term.