HARVARD SUMMER SCHOOL ECON S-192: INTRODUCTION TO CAPITAL MARKETS AND INVESTMENTS SPRING 2012

Dr. Shaikh A. Hamid

Office Hours:
Tues/Thurs: After class

COURSE DESCRIPTION (DRAFT: NOT FOR CLASS USE) Course Objective This course is designed to provide a grounding of: the capital markets and investment environment concepts relating to investment decision making organization of securities markets and securities trading portfolio theory company analysis and equity valuation bond fundamentals and valuation derivative markets. The overall objective is to provide an introduction to the framework of modern portfolio theory and investment analysis with which one can critically evaluate alternatives relating to investments in financial securities and construct portfolios with desired risk/return characteristics. Required Text 1. Text: Bodie, Kane, and Marcus, Investments, 9th Edition, McGraw-Hill, 2011. 2. Financial Calculator that you know how to use. Recommended Books 1. Peter Lynch. One Up On Wall Street. Penguin, 1993. 2. Peter Lynch. Beating The Street. Simon & Schuster. 1991. 3. Roger Lowenstein. Buffet: The Making of an American Capitalist. Random House, 1995. 4. Robert Hagstrom. The Warren Buffet Way. John Wiley. 1994. 5. Janet Lowe, Benjamin Graham on Value Investing. Penguin Books, 1994. 6. Peter Bernstein, Capital Ideas, Free Press. 1992. 7. Peter Bernstein, Against the Gods, Wiley & Sons. 1996. 8. Burton G. Malkiel, A Random Walk Down Wall StreetThe Time-Tested Strategy for Successful Investing, W.W. Norton & Co., Inc., 2007. 9. Benjamin Graham, The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition), HarperCollins Publishers, Inc., 2005. 10. William J. Bernstein, The Four Pillars of Investing: Lessons for Building a Winning Portfolio, The McGrawHill Companies, Inc., 2002.

11. 12.

Jeremy J. Siegel, Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long Term Investment Strategies, 4th Edition, The McGraw-Hill Companies, Inc., 2008. Benjamin Graham and David Dodd, Security Analysis, 6th Edition, The McGraw-Hill Companies, Inc., 2009.

Grading Policy Final grading will be based on: Exam I................................35% Exam II................................40% Individual Project................15% Class Participation...............10% 100% Exams
Exams will be closed book, closed notes. You can bring a one-page formula sheet to the exam. You can write on both sides of the sheet. You can explain the notations of formulas, but cannot solve problems or write conceptual notes. You will staple formula sheets to your exam.

Exams will have some multiple choice conceptual questions, but the major part will be quantitative questions similar to the problems we will solve in the class and similar to the ones assigned in syllabus from the end of chapters. Exam II is not cumulative. Individual Project You will track the Dow Jones Industrial Average (DJIA) and the NASDAQ Index daily for 3 weeks, and account for the causative factors impacting the large and small stock markets. The goal is to gain experiential learning of the factors that impact the markets, the direction and severity of the impact, and the extent to which the markets are correlated. Student subscription to the Wall Street Journal is available. You may also collect data and information from the internet: finance.yahoo.com, bloomberg.com, money.cnn.com, quote.com or other Internet sources listed in the text. The project is described in a separate handout. Information Card Please submit an information card with a photograph (or a photocopy of a photograph) within one week of class so that I may get to know you as the unique individual that you are. This will also help me in grading for class participation. Doing Well in the Course Please be prepared to put in your very best. You will learn tools and techniques that will enable you to better invest your or other peoples money. If you get less than 50% in any component of the course, you have to make it up, or get an F grade overall. Regular class attendance is of utmost importance. In case of absence caused by unavoidable circumstances, arrange with friend(s) to collect handouts and get class lecture notes. Handouts of a class will not be available in the following class. You will be responsible for any information given in class even if you are not present. This includes any changes in the assignments or materials to be covered.

Regular attendance will account for part of the class participation grade. The other part will come from active participation in class discussion. Before coming to class, please go over the relevant chapter from the textbook so you can participate in class. After we discuss a chapter, solve problems that are assigned in syllabus from end-of-chapters. Problems are not assigned from each chapter. Please try to answer on your own before you look at the solutions. Formation of study groups may be helpful. Problems assigned will not be discussed in class (there wont be enough time for that). If you do not understand the solution to a problem, please come during office hours. Promptly bring to my notice any problem you encounter (before it is too late). Two-way communication is vitally important for any joint endeavor (like this course) to be successful. Assignments should be submitted in hardcopy, and not electronically.

TENTATIVE SYLLABUS Session: Date Topic Chap # Chap Problems

1: Jun 26 2: Jun 28 3: Jul 3 4: Jul 5 5: Jul 10 6: Jul 12 7: Jul 17 8: Jul 19 9: Jul 24 10: Jul 26

Overview of Investment Process How Securities Are Traded? Asset Allocation Optimal Risky Portfolios Capital Asset Pricing Models Index Models Arbitrage Pricing Model EXAM I Efficient Market Hypothesis Technical Analysis Bond Prices and Yields Company Analysis and Stock Valuation Equity Valuation Models Individual project due Derivative Markets Portfolio Performance Evaluation International Diversification EXAM II

1,2,4 3 5,6 7 9 8 10

11 12 14 ** 18 20,22 24 25

11: Jul 31 12: Aug 2 Aug 7

Note: **: Handout on the topic to be given in class.