Syllabus

Title
1592 Course I - Principles of Capital Markets
Instructors
Rainer Brand, MSc (WU), Assist.Prof. Dr. Felix Fattinger
Contact details
sbwl.finance@wu.ac.at - Please always indicate your course number!
Type
VUE
Weekly hours
2
Language of instruction
Englisch
Registration
09/15/22 to 09/18/22
Registration via LPIS
Notes to the course
Dates
Day Date Time Room
Tuesday 10/04/22 07:00 PM - 09:30 PM TC.0.10 Audimax
Monday 10/10/22 10:15 AM - 12:30 PM TC.3.08
Tuesday 10/11/22 07:00 PM - 09:30 PM TC.0.10 Audimax
Monday 10/17/22 10:15 AM - 12:30 PM TC.3.08
Tuesday 10/18/22 07:00 PM - 09:30 PM TC.0.10 Audimax
Monday 10/24/22 10:15 AM - 12:30 PM TC.3.08
Tuesday 10/25/22 07:00 PM - 09:30 PM TC.0.10 Audimax
Monday 11/07/22 10:15 AM - 12:30 PM TC.3.08
Tuesday 11/08/22 07:00 PM - 09:30 PM TC.0.10 Audimax
Monday 11/14/22 10:15 AM - 12:30 PM TC.3.08
Monday 11/21/22 12:30 PM - 02:00 PM Präsenz-Prüfung

Contents

Unit 1

o What is Finance about?

o Why is Finance relevant?

o What are the main problems we want to solve?

o Discounting/Present Value/Net Present Value overview

 

Unit 2

o Utility and risk preferences

o Statistical Properties (Expectation, Variance, Covariance, Correlation), Diversification for portfolios

 

Unit 3

o Mean-Standard Deviation relationship (for 2-Asset-Portfolio and N-Asset-Portfolio)

o Efficient Frontier with and without risk-free asset

o Tangency Portfolio

 

Unit 4

o Capital Asset Pricing Model

o Beta Estimation

o Empirical Analysis of Efficient Portfolios and the CAPM

 

Unit 5

o Factor Models

o Decomposition of Risk (systematic – unsystematic risk)

o Estimating Weights of Factor Portfolios

Learning outcomes

After completing the course, students will be able to

· understand the relationship of risk and return for financial assets.

· calculate the risk and return of financial assets and portfolios.

· utilize diversification for optimal investment choices.

· identify optimal portfolio weights of a set of risky financial assets.

· comprehend the assumptions and shortcomings of the Capital Asset Pricing Model.

· decompose the risk of a financial asset to firm-specific and common factors.

· compute a measure for market-related risk of individual financial assets and portfolios.

Attendance requirements

Participation is compulsory in the interactive part. There are grade related performance assessments in each interactive unit. There is absolutely no way to get these points if you are not present for the entire unit.

Teaching/learning method(s)

The course is composed of two parts, a lecture part (5 units) and an interactive part (5 units). The lecture part is organized in only one big class for all students of the specialization. The interactive part is organized in small groups (max. 30 students). The five lecture units take place once a week. The five interactive units also take place once a week, but start one week after the first lecture unit.

The teaching approach of the lecture part is class room teaching type. There will be a final exam which covers the content of the lecture part. In the interactive part a mix of methods is applied that includes presentations by the lecturer, class discussions, student presentations of numerical examples (“mini-cases”) and real-life case studies.

Based on the introduction to the underlying concepts in the lecture part, students will have to prepare small numerical problems ("mini-cases") for the interactive part. E.g.: The concepts of the first lecture unit are applied and deepened in the first interactive unit, and so on. The mini-cases are presented by students and solutions are discussed with the lecturer. In addition, more involved case studies are discussed to provide more insight into industry applications.

The courses are held on campus. The final exam will also be on campus.

Assessment

The components for the grades are weighted as follows:

  • 40% lecture part (final exam)
  • 60% interactive part

Interactive part: Students have to prepare mini-cases for the weekly sessions and have to indicate (“check”) the mini-cases they can solve and are ready to present before each session. The solutions of the mini-cases must be uploaded to Learn before each interactive unit. Each example will be presented by a randomly selected student who checked this example. Students need to check a minimum number of mini-cases to pass the course. The baseline number of mini-cases and the minimum number will be communicated before the start of the interactive part, e.g., a baseline of 30 mini-cases with a minimum of 21 mini-cases to pass. Note, the baseline number serves as a reference, there can be more but never less mini-cases than indicated by this number.

The presentation of mini-cases will be evaluated. Students need to be able to solve the mini-cases they present and explain their reasoning. A negative assessment of a student's presentation reduces the number of checked mini-cases. The precise deduction for such a fail will again be communicated before the start of the interactive part, e.g., a deduction of 6 mini-cases. The same deduction applies if a student indicates mini-cases he/she did not solve.

For example: If a student checks 27 mini-cases overall and fails one presentation, the number of checked mini-cases is reduced to 21. Note that two failed presentations will always lead to a number of checked mini-cases that is below the necessary minimum number and, thus, the student fails the course.

Grading:

Formally, the evaluation is based on the percentage of credits earned (minimum of 50% of credits needed to pass). This percentage of credits C will be computed by C = 0.4*Clecture + 0.6*Cinteractive. Clecture denotes the percentage of credits earned at the final exam of the lecture part (between 0% and 100%). Cinteractive denotes the percentage of credits earned for the interactive part. The interactive part credits are calculated by dividing the checked mini-cases (after potential reductions for fails) by the baseline number of mini-case, e.g., 21 checked mini-cases / 30 = 70%. If the checked number of mini-cases is below the minimum number, than the resulting credits for the interactive part is 0% and the student fails the course.

For example: The student scores 90% in the final exam and 70% in the interactive part, then C = 0.4 * 90% + 0.6 * 70% = 78%.

The following grading scheme based on C is applied:

Percentage Grade
[87.5%;100%]: 1
[75%;87.5%): 2
[62.5%;75%): 3
[50%;62.5%): 4
<50%: 5

square bracket [ ] = percentage is still included in the quantity
round bracket ( ) = percentage is no longer included in the quantity

Prerequisites for participation and waiting lists

Students need to be admitted to the specialization Finance: Markets, Institutions & Instruments to register for the course.

Readings

1 Author: Hillier, Grinblatt, Titman
Title:

Financial Markets and Corporate Strategy


Publisher: McGraw Hill
Edition: 2nd European Edition
Content relevant for class examination: Yes
Recommendation: Strongly recommended (but no absolute necessity for purchase)
Type: Book

Recommended previous knowledge and skills

basic knowledge of Excel or R, basics in Statistics

Availability of lecturer(s)

felix.fattinger@wu.ac.at

Last edited: 2022-05-25



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