Course Schedule and Catalog

Long Title: INVESTMENTS II

Department: Management

Grade Mode: Standard Letter

Course Type: Lecture

Credit Hours: 1.5

Prerequisite(s): MGMT 645

Description: This is a project-based course. The class will act as a team to construct a portfolio of large cap stocks designed to outperform the S&P 500 with minimal tracking error. Stock selection will be by quantitative methods. The basic approach will be to assume a factor model and use the Arbitrage Pricing Theory to find the mean-variance frontier for active weights. Other quantitative methods – for example, pairs trading – may be explored to improve portfolio selection. Alternative volatility and correlation estimation methods will be examined. The effects of model misspecification, estimation error, and parameter instability will be analyzed by evaluating performance out of sample. Initial analysis will be done industry by industry. Each student will be responsible for analyzing the returns of the stocks in one industry. When these analyses are complete, other tasks will be assigned as the team builds a portfolio and develops risk analysis methods. Students will present their results to the class via oral and written reports. Repeatable for Credit.