Tribhuvan University
Faculty of Management
Office of the Dean
Bachelor of Business Administration (BBA)
Course Objective
:The aim of this course is to provide students the fundamental knowledge on investing in securities. Specifically, it aims at enabling students to understand financial markets, estimate risk and return from the securities, appraise them to form portfolio for investment, and analyze the economy and the industry in which they make an investment.
Course Description
:This course begins with a broad overview of investment environment and describes financial instruments and their markets. Then it deals with the risk and return of an individual asset as well as that of portfolios, and the selection of optimal portfolio. It discusses how assets are priced by using capital assets pricing model. It also deals with how debt and equity securities are valued for investment decision making purpose, and finally presents the framework of analyzing the economy and the industry in which investments are made and basics of technical analysis.
Course Contents:
Lecture hours show the approximate classroom time allocated to each unit.
Unit 1.Investment Environment
- Meaning of investment
- The investment process
- Real assets and financial assets
- Types of financial assets
- Financial intermediaries
- Financial markets
- Efficient markets
- Major players in the financial markets
- Ethical issues in investing.
Unit 2.Securities Markets
- Concept and types of securities markets
- Trading of securities
- Types of markets
- Types of orders
- Trading mechanisms
- The rise of electronic trading
- ECNs
- New trading strategies
- Globalization of stock markets
- Trading costs
- Buying on margin
- Short sales
- Construction of stock market indexes – price-weighted index, value-weighted index, equally-weighted index
- Functions of Nepal Stock Exchange
- and Role of Nepal Securities Board.
Unit 3.Risk and Return
- Concepts of risk and return
- Measuring investment returns: holding period return, returns over multiple periods, annualizing rates of return, expected return, time series of return
- Inflation and real rates of return
- Measuring risk: variance, standard deviation, coefficient of variation
- and Portfolio return and risk of a portfolio of risky and risk-free assets.
Unit 4.Efficient Diversification and CAPM
- Diversification and portfolio risk
- Asset allocation with two risky assets
- Covariance and correlation
- The risk-return trade-off with two-risky-assets
- The mean-variance criterion
- The optimal risky portfolio with a risk-free asset
- Efficient diversification with many risky assets
- The efficient frontier of risky assets
- Choosing the optimal risky portfolio
- The Capital Asset Pricing Model: the model, assumptions, implications, and the security market line.
Unit 5.Bond Prices and Yields
- Bond pricing
- Bond pricing between coupon dates
- Bond pricing in excel
- Bond yields: yield to maturity, yield to call, realized compound return versus yield to maturity
- Bond prices over time
- and Yield to maturity versus holding-period return.
Unit 6.Equity Valuation
- Fundamentals of equity valuations
- Intrinsic value versus market price
- Dividend discount models: the constant-growth and multistage growth models
- Price–earnings ratios
- and pitfalls in P/E analysis.
Unit 7.Macroeconomic and Industry Analysis
- Domestic macro economy
- Government policy: fiscal policy and monetary policy
- business cycles
- Economic indicators
- Industry analysis: defining an industry, sensitivity to business cycle, sector rotation, industry lifecycles, and industry structure and performance.
Unit 8.Technical Analysis
- Concept
- Underlying assumptions
- Advantages
- Challenges
- Technical trading rules and indicators: contrary-opinion rules, follow the smart money, momentum indicators, stock price and volume techniques.
Suggested Readings:
Bodie, Z., Kane, A., & Alan, J. M. Essentials of investments. New York: McGraw Hill. Reilly, F. K. & Keith, C. B. Investment analysis and portfolio management. New Delhi: Cengage Learning. Gitman, L. J., Joehnk, M. D., & Smart, S. B. Fundamentals of investing. New Delhi: Pearson Education.