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AC.F321: Investments

Department: Accounting and Finance NCF Level: FHEQ/QCF/NQF6//RQF6
Study Level: Part II (final year) Credit Points: 15.0
Start Date: 15-01-2018 End Date: 27-04-2018
Available for Online Enrolment?: Y Enrolment Restriction: Fully available to all students
Module Convenor:

Syllabus Rules and Pre-requisites

  • The student must take 1 modules from the following group:

CMod description

  • This module covers the fundamental concepts and techniques of modern investment theory and practice. Topics include security analysis, equity and bond portfolio management, asset allocation, performance evaluation, estimation of risk measures and hedging. There is also an emphasis on some of the practical issues in portfolio management.

Curriculum Design: Outline Syllabus

  • Week 1: Risk Aversion and Capital Allocation

    This lecture introduces basic concepts on risk aversion, risk premium, and utility. It then develops allocation of funds between risky and risk-free assets.

    Required reading: Bodie, Kane and Marcus (2014) Chapter 5.4–5.8 and 6.

    Week 2: Modern Portfolio Theory

    This lecture discusses portfolio theory including diversification, portfolio risk and the Markowitz Portfolio Selection Model. Further our discussion in Week 1, we will move from the risky and risk-free asset combinations to the combinations of two or more risky assets.

    Required reading: Bodie, Kane and Marcus (2014) Chapter 7.

    Week 3: Capital Asset Pricing Model

    This lecture presents the capital asset pricing model (CAPM), which is an equilibrium model for the pricing of assets based on risk. We will discuss CAPM’s assumptions and implementation, major implications of model, and development of the Security Market Line.

    Required reading: Bodie, Kane and Marcus (2014)  Chapter 9.

    Week 4: Index Models

    This lecture compares the Markowitz model with the single index model to analyse their strengths and drawbacks. We will address practical issues that arise when implementing the index models by using regression techniques.

    Required reading: Bodie, Kane and Marcus (2014) Chapter 8.

    Week 5: Arbitrage Pricing Theory and Multifactor Models

    This lecture introduces the concepts of arbitrage and market equilibrium, and discuss the arbitrage pricing theory (APT) as well as the differences between CAPM and APT.

    Required reading: : Bodie, Kane and Marcus (2014)  Chapter 10.

    Week 6: Efficient Market Hypothesis

    This lecture examines the concept of market efficiency—securities are fairly priced and will discuss the implications of market efficiency for investors and observed market anomalies.

    Required reading: : Bodie, Kane and Marcus (2014)  Chapter 11

    Week 7: Empirical Analysis of Security Returns

    This lecture focuses on the empirical tests of the CAPM and APT discussing the methods of test as well as presenting the findings from the financial data. Various multifactor models are presented to analyze market anomalies.

    Required reading: : Bodie, Kane and Marcus (2014)  Chapter 13

    Week 8: Mutual Funds, Closed-end Funds and ETFs

    This lecture introduces the concept of an investment company. It focuses on the most important types of investment companies currently engaging into investment management, such as mutual funds, ETFs and closed-end funds.

    Required reading: Bodie, Kane and Marcus (2014) Chapters 4

    Week 9: Portfolio Performance Evaluation

    This lecture discusses and calculates various return measures and risk-adjusted return measures that are used for evaluation of portfolio managers.

    Required reading: Bodie, Kane and Marcus (2014)  Chapter  24

    Week 10: Hedge Funds: History, Characteristics and Strategies

    This lecture discusses the unique characteristics of hedge funds and the various hedge fund strategies. It analyzes the evidence on hedge fund performance and the implementability of evaluating its performance.

    Required reading: Bodie, Kane and Marcus (2014) Chapter 26

  • 75% Exam
  • 25% Coursework

Educational Aims: Subject Specific: Knowledge, Understanding and Skills


    The aim of this course is to equip students with the tools necessary to enable them to make the core investment management decisions that managers face on a daily basis as well as the knowledge as to where they can find the information necessary to apply those tools. This course is an introduction to investment analysis, with emphasis on the pricing of equity securities, which has AcF 214 M or L as its pre-requisite. This course covers fundamental concepts and key issues in asset pricing; modern portfolio theory and its applications; equilibrium theories of asset pricing; portfolio performance evaluation; mutual funds and hedge funds. It provides an entry point to advanced-level subjects and foundational knowledge on the valuation and arbitrage of investment assets.


Learning Outcomes: Subject Specific: Knowledge, Understanding and Skills

  • By the end of the course students should be able to:

    •     Discuss the theory and applications of the modern portfolio analysis and understand their strengths and limitations.

    •     Trace the efficient frontier under different conditions.

    •     Construct the optimal portfolio for an individual or for funds with specific goals.

    •     Solve real-world problems with asset pricing models.

    •     Develop techniques to evaluate the performance of money managers.

    •     Understand the debate questioning the efficient market hypothesis.

    •     Comprehend the structure and objectives of mutual funds, closed-end funds and ETFs and identify when they are appropriate.

    •     Understand the characteristics of hedge funds, and the variety of hedge fund strategies and styles.

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