• introduction to investment management,
• personal and professional usefulness of investment management,
• risk and return as the criteria to evaluate investments,
• realized return versus expected return (ex-post versus ex-ante),
• total return / holding period return calculation using yield and capital gains components,
• relatvie return,
• Cumulative Wealth Index,
• arithmetic return and geometric return,
• adjustment for foreign currency exchange rate changes on returns, and
• adjustment for inflation on returns.

• review of returns calculations from last class,
• adjustment for foreign currency exchange rate changes on returns,
• calculation of variance and standard deviation as risk measurement,
• steps to computer standard deviation given historical returns,
• risk factors that firms face,
• equity (equity risk premium) and bond premium (credit spread),
• difference between arithmetic and geometric returns as measure of an asset's return volatility.

• calculation of discount yield for US T-bills,
• calculation of taxable equivalent yield for municipal bonds,
• differences and similarities of equity, preferred shares, and bonds,
• the role of financial markets,
• how investment bank help companies in the IPO process,
• price-weighted versus market capitalization based weighting of index calculation.

• regulations of the financial markets,
• cash versus margin accounts,
• types of orders,
• calculation of expected return using probabilities,
• calculation of portfolio return,
• calculation of covariance and correlation coefficient,
• calculation of portfolo risk,
• scenario analysis of risk and return on a two asset portfolio using different weights, and
• scanario analysis of risk and return on a two asset portfolio using different weights and different correlation.

• review of individual asset's risk and return calculation,
• review of portfolio basis risk and return calculation,
• risk and return trade-off discussion,
• adjustment of investment return through demand and supply and market price change,
• practice questions on calculating expected return and expected variance for a portfolio of two assets, and
• Quiz One.

• review of calculation of portfolio return and portfolio risk,
• mapping of portfolio risk and return,
• determination of efficient frontier,
• domination of other portfolio by portfolio on the efficient frontier,
• global minimum variance portfolio,
• why efficient frontier is concave in shape,
• indifference curve,
• why indifference curve is convex in shape,
• combining efficient frontier and indifference curve to find optimal portfolio for investors with different risk preference,
• adding risk free asset,
• derivation of the market portfolio, and
• combination of risk free asset and market portfolio to satisfy investors with different risk preference via lending and borrowing.

• review of efficient frontier, dominated portfolio, and global minimum variance portfolio,
• review of adding risk free asset to the efficient frontier resulting in the capital market line (CML),
• assumptions used in the capital asset pricing model (CAPM),
• weighting for the calculation of portfolio risk and return in a lending situation, and
• weighting for the calculation of portfolio risk and return in a borrowing situation.

• security market line with beta to compare risk level of individual assets to the market portfolio,
• index single and multifactor models,
• arbitrage pricing model, and
• introduction to the qualitative part of equity valuation.

• determination of free cash flow to firm (FCFF) and free cash flow to equity (FCFE),
• multiple approach using PE, PB, PS for equity valuation,
• discussion of differences between ROE and ROA,
• the Dupont approach to firm analysis, and
• the use of PEG for firm analysis.

• review of CAPM,
• single and multiple index models,
• APT,
• efficient market hypothesis, and
• asset allocation.

• anomalies to the efficient market theory,
• introduction to performance measurement (chapter 22),
• the use of benchmarks, and
• dollar weighted versus time weighted calculation of return for performance evaluation.

2. Transferable skills: Enabling students to obtain key skills and think critically and creatively.
Apart from assisting students acquiring a good handle on the mechanics of the above technical topics, the subject is also expected to help students improving on generic skills, such as critical thinking, good presentation and effective communication. Therefore, supporting the decision making process of management. Further, Cultivate finance related professionals with strong business awareness in a rapid changing economy.

3. Leading and working in a team.
Students could enhance and experience their leading and working skills as a team via class discussion and group tasks and assignment.

4. Lifelong Learning: Becoming an independent and self-directed learner.

Students are expected to read the reading materials and/or relevant textbooks before the lectures and complete assignments before the tutorials. Tutorial discussions will relate to material covered in the preceding lecture and will include consideration of problems and case studies. Students may be required to make presentations in the tutorial.

Special tutorials may be conducted from time to time for revision such as mid term test, final exam or other topics: time value of money, use of financial calculators, stock index and so on.

For this course, a general purpose non-financial calcuator can be used. Students who do not have ready access to a financial calculator should be able to perform all the required analysis and calculations using a general purpose non-financial calculator for the tutorials, assignments, mid-term test, and final examination.

You can also use a non-programmable financial calculator for the tutorials, assignment, mid-term test, and final examination. Common financial calculators are HP12c and TI BAII PLUS. User manual in simplified chinese and a tutorial for the HP12c can be found here and a simple tutorial for the HP12c can be found here. User manual for the TI BAII can be found here.

Regardless of the types of calculators used for this course, students are responsible for their own equipment and they cannot be shared in a quiz, test, or examination situation. As a result, students MUST bring their own calculators to each class. In addition, each student must be proficient in the use of their own equipment.

Electronic translators CANNOT be used for quiz, test, or examination situations, but they can be used during class (only with volume off) and your own study time.

There are specific terms that apply to accounting and finance, and there are various online sources that can help students understand these terms.

Download and print for reference:

• Hong Kong Exchange glossary of terms (English to Chinese)
• 88translation.com finance dictionary (Chinese to English, English to Chinese)

Online finance dictionaries:

• Reuters Chinese to English and English to Chinese finance dictionary
• Goldman Sachs English to Chinese finance dictionary
• Goldman Sachs Chinese to English finance dictionary
• Morgan Stanley English to Chinese finance dictionary

Other unverified sources of financial references:

• Finance Street - a finance related site prepared by the government
• Financial glossary of terms
• List of dictionaries