ESF:MPF_APOT Portfolio Theory - Course Information

MPF_APOT Portfolio Theory

Extent and Intensity

2/2/0. 6 credit(s). Type of Completion: zk (examination).
Taught in person.

Teacher(s)

Andrea Rigamonti, B.Sc., M.Sc., Ph.D. (lecturer)
Andrea Rigamonti, B.Sc., M.Sc., Ph.D. (seminar tutor)

Guaranteed by

Andrea Rigamonti, B.Sc., M.Sc., Ph.D.
Department of Finance – Faculty of Economics and Administration
Contact Person: Mgr. Jana Nesvadbová
Supplier department: Department of Finance – Faculty of Economics and Administration

Prerequisites (in Czech)

! MPF_TEPO Portfolio Theory && ! NOWANY ( MPF_TEPO Portfolio Theory )

Course Enrolment Limitations

The course is also offered to the students of the fields other than those the course is directly associated with.
The capacity limit for the course is 24 student(s).
Current registration and enrolment status: enrolled: 0/24, only registered: 0/24, only registered with preference (fields directly associated with the programme): 0/24

fields of study / plans the course is directly associated with

• Finance (Eng.) (programme ESF, N-FU)
• Finance (programme ESF, N-FINA)

Course objectives

In the course, students will get acquainted with the basic methods for the evaluation of investment opportunities, with the most important asset pricing models, and with the mathematical methods used in portfolio optimization. The course is especially important for students who intend to work in the field of asset management at financial institutions.

First, students will familiarize with important concepts required to understand the functioning of financial markets and the evaluation of securities. They will then be introduced to the theoretical framework of portfolio optimization and with the most important asset pricing models. Finally, students will learn how portfolio optimization works in practice and how to perform backtesting and performance evaluation, also outside of the standard mean-variance framework.

The main objectives of the course are:
- understanding the valuation of securities yield and risk;
- understanding the basics of portfolio theory;
- understanding the basic approaches to compiling a portfolio of securities;
- the ability to properly evaluate portfolio performance;
- the ability to apply the acquired knowledge to areas not directly discussed in the course.

Learning outcomes

Students will be able to:
- evaluate investment opportunities
- apply knowledge of the key characteristic of traded equity securities
- create a portfolio in the line with Markowitz´s and Sharpe concept
- solve the portfolio problem with weight restriction (short sell, max. weight of a security)
- create long-short portfolios based on asset pricing models
- evaluation of portfolio performance, also beyond the mean-variance framework

Syllabus

• Introductionary notions about financial markets.
• Interest rates and valuation principles.
• Review of basic notions of probability and statistics.
• Expected return, risk, input parameters estimation.
• Mean and variance of a portfolio of assets.
• Systematic and idiosyncratic risk. The CAPM. Estimation of CAPM parameters.
• Non-standard CAPM models. Arbitrage Pricing Theory. Multifactor asset pricing models.
• Mathematical models for defining optimal portfolio weights in Markowitz's mean-variance framework.
• Global minimum variance portfolio. Long-only minimum variance portfolio. Equally weighted portfolios.
• Long-short portfolios.
• Factor investing.
• Performance evaluation. Downside risk.
• Introduction to R and RStudio. (during seminar)
• Obtaining financial data. Managing datasets. (during seminar)
• Basic statistical analysis and data visualization. (during seminar)
• Optimal portfolio computation. (during seminar)
• Using factor models. (during seminar)
• Construction of long-short portfolios. (during seminar)
• Performance evaluation and backtesting. (during seminar)

Literature

required literature
• ELTON, Edwin J. Modern portfolio theory and investment analysis. 8th ed. Hoboken, N.J.: John Wiley & Sons, 2011, xviii, 727. ISBN 9780470505847. info
• BERK, Jonathan and Peter DEMARZO. Corporate Finance. 4th Edition. Pearson, 2016. ISBN 978-1-292-16016-0. info

recommended literature
• Portfolio Management : Theory and Practice Autor: Scott D. Stewart, Christopher D. Piros, and Jeffrey C. Heisler https://ebookcentral.proquest.com/lib/masaryk-ebooks/detail.action?docID=5741214

not specified
• REILLY, Frank K and C BROWN KEITH. InvestmentAnalysis and Portfolio Management. Australia: South-Western Cengage Learning, 2019. 11th ed. ISBN 978-1-305-26299-7. info
• SCHULMERICH, Marcus, Yves-Michel LEPORCHER and Ching-Hwa EU. Applied asset and risk management : a guide to modern portfolio management and behavior-driven markets. Berlin: Springer, 2015, xvii, 476. ISBN 9783642554438. info

Teaching methods

Lectures. Practical exercises during computer seminars. Home assignments.

Assessment methods

Two mandatory assignments (one at the middle of the course and one toward the end) to be done at home will be given to the students and contribute to the final grade.
Attendance to the seminars is mandatory; a maximum of three absences are tolerated. Exceptions can be made for serious reasons (e.g., illness), which need to be discussed with the lecturer.
The final grade is determined through a written test after the end of the course. It will consist of short theoretical questions and exercises.

Then final classification is the following:
A= 92 – 100 %
B= 84 – 91 %
C= 76 – 83 %
D= 68 – 75 %
E= 60 – 67 %
F= less than 60 %

If a student will cheat during the final written test, the teacher will interrupt the exam and it will be graded as failed.

Language of instruction

English

Further Comments

The course is taught annually.
The course is taught: every week.

Listed among pre-requisites of other courses

• MPF_TEPO Portfolio Theory
  !MPF_APOT && !NOWANY(MPF_APOT)  

• Enrolment Statistics (Spring 2025, recent)
  
• Permalink: https://is.muni.cz/course/econ/spring2025/MPF_APOT