AEM 4670 - Investments

Fall, Spring. 3 credits. Letter grades only (no audit).

Prerequisite: AEM 2240. Enrollment preference given to: Dyson students. Co-meets with AEM 5670.

Fall: D. Roesch; Spring: J. Murfin.

This course discusses a wide range of investments-related topics, both conceptually and analytically. We first study basic frameworks that provide investors guidance on how to value securities and make investment decisions; topics include basic concepts of return, risk, and prices, asset allocations, the capital asset pricing model, and performance evaluation. We then study empirical patterns of asset prices and discuss the implications of these patterns for investors’ trading strategies; here, we introduce the important concept of market efficiency. Next, we discuss bond market investing and the yield curve, as well as derivative contracts such as futures and options. Finally, we discuss selected topics in behavioral finance, an active subfield within finance that tries to improve our understanding of financial markets and investor behavior using frameworks that are psychologically realistic; here, topics include a set of systematic mistakes real-world investors make, the underlying mechanisms that cause these mistakes, and ways to improve financial decision making.

Outcome 1: Course will deepen the students’ understanding of the core principles behind investment and Portfolio Management.

Outcome 2: Offers focus on the theoretical foundations of asset prices, with particular focus on the largest asset classes: Bonds, Equities, and Derivatives (Options).

Outcome 3: Students will be able to manage portfolios across asset classes, and learn how assets are priced either through no arbitrage arguments or general equilibrium price theory.

Outcome 4: Students will learn how these concepts are extended in an international framework, and how macroeconomic and global factors can affect investment decisions and asset prices.