Tribhuvan University
Faculty of Management
Office of the Dean
Bachelor of Business Management (BBM)
Course Description
:This course begins with a process and components of investment enviro nment viz. financial assets, intermediaries and 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 also deals with valuation of debt and equity securities . Finally, it presents the framework of analyzing the economy and the industry in which investments are made and concept of behaviroul finance an d technical analysis.
Course Objective
:The aim of this course is to provide students the fundamental knowledge on security analysis and portfolio management . Specifically, it aims at enabling st udents to understand investment environment, estimate risk and return from the securities, perform fundamental analysis and appraise them to form and manage portfolio. Course Description This course begins with a process and components of investment enviro nment viz. financial assets, intermediaries and 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 also deals with valuation of debt and equity securities . Finally, it presents the framework of analyzing the economy and the industry in which investments are made and concept of behaviroul finance an d technical analysis.
Course Contents:
Lecture hours show the approximate classroom time allocated to each unit.
Unit 1. Introduction
- Meaning of investment
- The investment proce ss
- R eal assets and financial assets
- Types of financial assets
- Financial intermediaries
- Financial markets
- Major pl ayers in the financial markets.
Unit 2. Securities Markets
- Concept and types of securities markets
- Trading of securities
- Types of orders
- Trading mechanisms
- 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 r eturn
- Measuring risk: variance, standard deviation, coefficient of variation
- and 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 ri sky assets
- Choosing the optimal risky portfolio
- The Capital Asset Pricing Model: the model, assumptions, implications, and the security market line.
Unit 5. Fixed Income Securities
- Concept and types of fixed income securities, Bond pricing
- Bond yields
- and Bond duration.
Unit 6. Common Stock Valuation
- Fundamentals of common stock valuations
- Intrinsic value versus market price
- Dividend discount models: the constant-growth and multistage growth models
- Price–earnings ratios.
Unit 7. Macroeconomic and Industry Analysis
- Domestic macro economy
- Government policy: fiscal policy and monetary policy
- business cycles
- Economic indicators
- Industry analysis: meaning and significance, sensitivity to business cycle, sector rotation, industry lifecycles, and industry structure and performance.
Unit 8. Behaviroul Finance and Technical Analysis
- Concept of behaviroul finance
- Technical analysis, Underlying assumptions
- Technical vs fundamental analysis
- 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. Gitman, L. J., Joeh nk, M. D., & Smart, S. B. Fundamentals of investing . New Delhi: Pearson Education. Reilly, F. K. & Keith, C. B. Investment analysis and portfolio management. New Delhi: Cengage Learning.