Portfolio Theory and Asset Pricing

Learning Outcomes

Subject Specific Intellectual and Research Skills

Having successfully completed this module you will be able to:

• analysing an investment portfolio in terms of risk and return;
• identifying an efficient portfolio and calculating the efficient frontier;
• using the single-index model and other factor models to analyse the risk and return properties of equity portfolios, together with their role in generating market anomalies and their relation to investment management strategies.
• using the capital asset pricing model (CAPM) to identify the required return on a financial asset;

Knowledge and Understanding

Having successfully completed this module, you will be able to demonstrate knowledge and understanding of:

• the construction of portfolios of risky assets, the relationship between risk and return, and the nature and sources of risk in capital markets;
• the foundations of asset pricing models with emphasis on the capital asset pricing model (CAPM) and arbitrage pricing theory (APT).

Transferable and Generic Skills

Having successfully completed this module you will be able to:

• critically analyse returns data for financial securities and make informed decisions about investment management;

• Introduction to portfolio theory
• The trade-off between risk and return in capital markets
• Security and portfolio analysis
• Selecting the optimum portfolio
• Advanced Portfolio Optimization
• International Diversification
• Consumption and Investment
• The capital asset pricing model (CAPM) and non-standard forms of CAPM
• Arbitrage Pricing Theory
• Single index model and other multi-factor models of risk and return

Teaching and learning methods

The module is taught over a period of twelve weeks. Each week consists of 2 hours of teaching. The teaching consists of lectures that incorporate case studies or numerical problem-solving exercises.

Resources & Reading list

Textbooks

Elton, E.J., Gruber, M.J., Brown, S.J. and Goetzmann, W.N. Modern Portfolio Theory and Investment Analysis. Wiley.

Bodie, Z., Kane, A., and Marcus, A.J.. Investments. McGraw-Hill Education.

Copeland, T. E., Weston, J. F. and Shastri, K. Financial Theory and Corporate Policy. Pearson.

Formative

This is how we’ll give you feedback as you are learning. It is not a formal test or exam.

Summative

This is how we’ll formally assess what you have learned in this module.

Referral

This is how we’ll assess you if you don’t meet the criteria to pass this module.

Repeat

An internal repeat is where you take all of your modules again, including any you passed. An external repeat is where you only re-take the modules you failed.

Repeat Information

Repeat type: Internal & External