After successful completion of the module, students:

• Are able to estimate risk and returns from portfolios and single assets.
• Can understand and apply Markowitz Portfolio Theory, including estimating minimum variance portfolios, mean-variance portfolios, with and without riskless assets.
• Learn the limitations to the Markowitz portfolio theory and possible alternatives to overcome the limitations.
• Are able to understand the theory and practice of the Capital Asset Pricing Model
• Can apply the asset pricing models to estimate expected returns of single assets.
• Learn how to estimate measures of portfolios’ performance.

A. Introduction to Asset Management

• Role of the Financial System
• Introduction to Investments and Asset Management
• Overview of Securities Trading
• Stock Market Indices
• Investment Funds

B. Markowitz Model of Portfolio Theory

• Risk and Return for a Single Asset
• Risk and Return in a Portfolio
• Portfolio Optimization and Risk-efficient Frontier without Riskless Asset
• Portfolio Optimization and Risk-efficient Frontier with a Riskless Asset

C. Limitations and Solutions for the Markowitz Model

• Limitations of the Markowitz model
• Michaud optimization
• Black-Litterman as an alternative model
• Current Research and New alternatives to Improve the Markowitz Model

D. Capital Asset Pricing Model (CAPM)

• Introduction to CAPM
• Derivation of CAPM
• Use of CAPM for valuation and asset pricing
• Empirical tests of CAPM

E. Asset Pricing

• Efficient Market Hypothesis
• Cross-sectional Return Predictors (Capital Market Anomalies)
• Joint Hypothesis and Asset Pricing Models
• Fama-French Three-Factor Asset Pricing Model
• New Generation of Asset Pricing Models

F. Performance Measurement