Presentation
Description
Portfolio Management – FINA20203A.H2022
Introduction to the different aspects of portfolio management, specifically to issues related to assets management (strategic, tactic and dynamic), and to investment strategies of portfolios that include stocks, fixed income securities and derivatives.
This course aims to teach and apply the concepts introduced in FINA 20201A introduction to investments and FINA 20210A Futures and Options. Some of the subjects that are covered include, among others, the process of portfolio management for individual and institutional investors, modern portfolio theories, hedging portfolios strategies, investment styles et strategies. Asset valuation and portfolio composition are also examined. As part of a team, the student must elaborate an investment policy statement for a fictitious client and manage his portfolio in a simulated environment.
Objectives
The course Portfolio Management complements the course Investments by exploring various issues underlying asset management. This is the most fundamental attribute of any professionally managed portfolio. Even if most of the concepts presented in class are specific to portfolios consisting of shares or stock market indices, the majority of these concepts apply to a wide variety of financial asset categories. In this course, students will become familiar with fundamental concepts of portfolio management including efficient frontier portfolios, multifactor models, financial asset pricing models, market efficiency and the performance evaluation of professionally managed portfolios.
Contact Information
Coordinator
Full-time Lecturer
Email: Office: 4.261, CSC
Lecturer(s)
Jean-François 1 of 25
Part-time Faculty Lecturer
Email: Groupe A01
Jérôme Bichut
Part-time Faculty Lecturer Email: Groupe A02
Teaching Assistant(s)
Teaching Assistant
Administrative Staff
Assistant to Academic Activities Email:
Learning Material
Bibliographic Resources
. Reilly, Brown, . Leeds (2018) . «Investment analysis & portfolio management» , 11th ed. ed.
ISSN: 9781305262997
Other link
eTextbook: Investment Analysis and Portfolio Management 11e
Investment analysis and portfolio management […]
Here is the procedure to create an account on the VitalSource platform:
Students can create an account with their personal HEC email by clicking on “create a Vitalsource
account” at the bottom of the VitalSource page: https://www.vitalsource.com/en-ca/login
When the account is created, the student must search for the book’s title or ISBN or click directly on the
following link to order the book:
https://www.vitalsource.com/en-ca/products/investment-analysis-and-portfolio-management-frank-k- reilly-v9781133711773?term=9780538482387
CFA Program Curriculum – Level 1 [Data]
Page 2 of 25
CFA Program Curriculum – Level 2 [Data] IMPORTANT
CFA Program Curriculum – Level 3 [Data]
Complementary Bibliographical Resources
Solutions 11 edition.zip
(Solutions 11 edition.zip)
Evaluations
Evaluation Guidelines
For the evaluation of learning outcomes, certain institutional guidelines have to be respected. For more information…
Your main duty: attending class
According to the School’s rules, students are expected to attend classes (or course activities). Instructors are not required to provide any additional help or adapt courses or evaluations due to a student’s absence.
Intellectual integrity: everybody wins!
Note that any evaluation may be run through software analysis to detect similarities. Find out how to avoid plagiarism and be careful when working on group assignments and co-operating with other students outside the classroom. For more information on intellectual integrity.
Exams: things to check before the big day
1. Make sure your student card is valid. For more information
2. Check the exam time and location on HEC en ligne.
3. Find out what materials you are allowed to bring into the exam, on your course’s site. 4. Is your calculator the approved type? For more information…
1 – Midterm Exam (35%)
Location: In class Submission: Paper Term: Written
Work Mode: Individual
Miscellaneous Resources
Instructions for the midterm exam:
At school, paper format, closed book, no reference material allowed
Topics covered: lectures 1 to 7
Questions may take different forms (e.g., multiple choice questions, true or false, short answers, essay
answers, etc.)
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Computer not allowed
A formula sheet will be attached to the exam booklet (see below) The use of two pre-approved calculators will be permitted
Formulas for the exam
(Formulae – Midterm.pdf)
If you have questions about the exam, they will be answered in class. To ensure that there are no students that benefit from privileged information, and for information that is consistent for everyone, no questions will be answered outside the class sessions (neither email nor in person).
2 – Final Exam (35%)
Location: In class Submission: Paper Term: Written
Work Mode: Individual
Miscellaneous Resources
Formulae.docx
(Formulae.docx)
If you have questions about the exam, they will be answered in class. To ensure that there are no students that benefit from privileged information, and for information that is consistent for everyone, no questions will be answered outside the class sessions (neither email nor in person).
3 – Portfolio Management Simulation (in teams) (30 %)
Location : In class / At home Submission : Paper
Term : Written
Work Mode : Team
Description
See section: Portfolio Simulation (on the Course Organisation tab) for more details.
Each team of 4 students will be tasked with the management of a portfolio initially composed exclusively of cash. Based on members’ research and investment skills, each team will build a diversified portfolio that will be rebalanced throughout the simulation period. The investment universe includes equities, exchange- traded products and derivatives traded on Canadian, US and certain other foreign exchanges (see list of available products on ). Given the low liquidity and the limited number of bonds available on Stock Trak, you will need to use other financial products to get an exposition to the bond market. All transactions and transaction confirmations are completed on the Stock Trak website. The main types of transaction orders are allowed (limit sell, short selling, buying on margin, etc.). The rules of the simulation are very close to those of the brokerage firm; they are available on the simulation management website. The registration fee for the simulation is approximately $30 per team.
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The simulation is not a game. It is a process of learning about financial markets and implementing an investment policy of an individual investor that the members of each team will have jointly developed. Therefore, the evaluation of the simulation will be done not only on the basis of the performance obtained but also and especially on the basis of the analysis and implementation of the needs of the client.
Evaluation grid PF Management simulation
(Evaluation grid PF Management simulation.pdf)
TMX Simulation
Many prices in cash to win (5000$ for the first price). See the hyperlink, for further information:
CNID Investment Challenge
– Learn from the mentorship and real-life experience of buy-side investment professionals. – Hone your skills by doing deep-dive company analysis.
– Pitch your investment recommendation to CNID’s experienced investors.
– Win a summer internship at CNID
Course Organisation 0 – Portfolio Simulation
Description
Instructions
Each team will be composed of 5 students and will be mandated to manage a $500,000 portfolio (initially all cash). Through research and using the teammates analysis abilities, each team will build a diversified portfolio that is theirs to rebalance as they see fit, over the course of the simulation. The assets available to invest in will be all those provided to you by StockTrak .
If you have questions during the simulation, they will be answered in class. To ensure that there are no teams that benefit from privileged information about the simulation, and for information that is consistent for everyone, no questions will be answered outside the class sessions (neither email nor in person). Prepare yourself in advance to ask your questions at the beginning of each class.
Should you still need to ask an email question, make sure that all your team members are included in your email.
Registration Here are the steps to register: Have a credit card for registration. Note that you may have a discount coupon available inside the Reily & Brown book (some other books such as the Investment course book also offer this discount). You will need to choose a team name (Username). The name of the simulation group is: HECMtl-GestionPF-H2022 (Registration link) Finally, you should know that you can get in touch with Stock Trak’s customer services if you have any questions. Note that we are not responsible for any errors that may occur during the simulation regarding the processing of orders by Stock- Trak or for any mistakes that may be caused by a misunderstanding of the functioning of the markets by the students.
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Case study PF Management simulation
(Case study PF Management simulation.pdf)
Activities/Resources before session
Simulation schedule
(Simulation schedule.xlsx)
Activities/Resources during session
Initial Report
(Initial Report.docx)
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Rapport périodique MO.xlsm
(Rapport périodique MO.xlsm)
Final Report.docx
(Final Report.docx)
Evaluation grid PF Management simulation.pdf
(Evaluation grid PF Management simulation.pdf)
F.A.Q. Simulation
Trading Futures on StockTrak
(Futures Explanation STOCKTRAK.xlsx)
Document explaining the impact of Futures on the portfolio of StockTrak
Miscellaneous Resources
CNN Money [Website]
Bloomberg News [Website] http://www.nasdaq.com/ [Website]
Bank of Canada [Website]
Reuters News [Website]
Canadian Bankers Association [Website] World Exchanges [Website]
Financial Times [Website]
Yahoo Financial News [Website] Financial Post
Statistics Canada
Globe and Mail
Google finance Canada
Google Finance US
Yahoo finance Canada
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1 – 3 – The Portfolio Management Process and Asset Allocation Decision
Description
Introduction to certain financial concepts (review) Steps in the portfolio management process
The asset allocation decision
The different asset classes
Investment policy: objectives & constraints
Objectives: performance & risks
Constraints: liquidity, horizon, regulation, taxation & unique circumstances Individual investor vs institutional investor
Strategic allocation: Client’s level of risk (beta)
Tactical allocation & selectivity: the portfolio manager’s choice of risk (alpha) The asset management industry
Alternative asset classes
Other aspects of portfolio management
Activities/Resources before session
. Reilly, Brown, . Leeds (2018) . «Investment analysis & portfolio management» , 11th ed. ed.
ISSN: 9781305262997
Other link
Chapter 1: The Invesment Setting (review)
Chapter 3: Organization and Functioning of Securities Markets (review)
Chapter 2: The Asset Allocation Decision (+ appendix)
Chapter 17: Professionnal Money Management, Alternative Assets, and Industry Ethics
Curriculum CFA Institute
CFA Institute curriculum level 3, Reading 2 : Behavioral Finance & Investment Processes, sections 1 to 4
CFA Institute curriculum level 3, Reading 24 : Portfolio Management for Institutional Investors, sections 1, 2, 3, 4, 6 (Pension funds) & 11 (Foundations)
Optional – CFA Institute curriculum level 3, Study Session 1-3 & 10-12 & 14
Activities/Resources during session
1- PF Management process
(1- PF Management process.pptx)
Exercise : Elaborate an Investment Policy
(Investment Policy Exercises.pdf)
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Template solutions IPS
(Template solutions IPS.pptx)
Activities/Resources after session
See Session 2
Miscellaneous Resources
Investment Process
(fig_proc_c1_1.pdf)
AMF investor profil
Determining Risk Profile – BMO
Desjardins – Investment Policy Statement
Vanguard – Investment Policy Statement
LifePath BlackRock
IShares Allocation process
Evolution of PF diversification & home bias in Canada
2 – The Portfolio Management Process and Asset Allocation Decision
Description
Introduction to certain financial concepts (review) Steps in the portfolio management process
The asset allocation decision
The different asset classes
Investment policy: objectives & constraints
Objectives: performance & risks
Constraints: liquidity, horizon, regulation, taxation & unique circumstances Individual investor vs institutional investor
Strategic allocation: Client’s level of risk (beta)
Tactical allocation & selectivity: the portfolio manager’s choice of risk (alpha) The asset management industry
Alternative asset classes
Other aspects of portfolio management
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Activities/Resources during session
Lecture Notes (See session 1)
CFA Code of Ethics & Standards of Professional Conduct Asset Manager Code
Activities/Resources after session
IPS Case – Exercises & Solutions
(IPS – Exercises&Solutions.pdf)
Chapter 1 : Reilly and Brown Questions 1-7, 11-15 Problems 1-2, 5-9 Appendix: Problems 1-3 Chapter 2 : Reilly and Brown Questions 1-7, 9-16, 18-23 Chapter 17 : Reilly and Brown Questions 1-10 Problems 1, 4- 5, 9 CFA Institute Readings Every exercises associated with mandatory readings
Exercises on Code of Ethics and Standards of Professional Conduct of the CFA Institute
(Session 1_2 Ethics.pdf)
Solutions to exercises on Code of Ethics and Standards of Professional Conduct of the CFA Institute
(Session 1_2 Ethics – Answers.pdf)
Additional Exercises (Ethics)
(Additional Exercices 1_2_With solution.pdf)
Solutions Chapters 1-2-3-17
(Solutions 1-2-3-17.zip) 11th edition
3 – The Portfolio Management Process and Asset Allocation Decision
Description
Introduction to certain financial concepts (review) Steps in the portfolio management process
The asset allocation decision
The different asset classes
Investment policy: objectives & constraints
Objectives: performance & risks
Constraints: liquidity, horizon, regulation, taxation & unique circumstances Individual investor vs institutional investor
Strategic allocation: Client’s level of risk (beta)
Tactical allocation & selectivity: the portfolio manager’s choice of risk (alpha) The asset management industry
Alternative asset classes
Other aspects of portfolio management
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Activities/Resources during session
See session 1 & 2
Miscellaneous Resources
Report on Retirement Plans [Report] Canadian Pension Knowledge
Projection Assumptions Guidelines – IQPF
4 – Economic Environment and Asset Allocation
Description
Monetary and fiscal policy
Economic activity and stock market performance
Economic indicators and the stock market cycle
Economic forecasts
Economic cycle and asset allocation
Economic cycle and sector allocation: sector portfolio rotation Economic cycle and international asset allocation
Activities/Resources before session
. Reilly, Brown, . Leeds (2018) . «Investment analysis & portfolio management» , 11th ed. ed.
ISSN: 9781305262997
Other link
No recommended exercice from the manual, refer to the readings and lecture notes for the topics under study.
Curriculum CFA Institute
CFA Institute curriculum level 3, Reading 3 : Capital Market Expectations, sections 3,5,6
Section 3 – Economic and Market Analysis: The Role of Econnomic Analysis and Analysis of Economic Growth
Section 5 – Approaches to Economic Forecasting
Section 6 – Business Cycle Analysis, Phases of the Business Cycle and Market Expectations and the Business Cycle
Optionnel – CFA Institute curriculum level 3, Study Session 2 & 3 on Economics
If you want to review or refine your analysis skills, read other sections of following chapters: Chapiter 8 to 10
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Activities/Resources during session
4- Economic Environment.pptx
(4- Economic Environment.pptx)
Activities/Resources after session
Exercises and Solutions on Economic Environment
(EXERCISES – ECONOMIC ENVIRONMENT.pdf)
Solutions Chapters 12 & 13
(RB Chapitres 12 _ 13.pdf) 10th Edition
Miscellaneous Resources
Economic Cycles [Video]
Interview Ray Dalio [Video]
JP Morgan – Guide to the Market [Article] Conference Board Canada
Conference Board Global
Economic Calendar Calendar National Bank International Economic Calendar Statistics Canada Data
Other American Indicators
Bureau of economic analysis
Seeking alpha
Mootley Fool Canada
The Street
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5 – Modern Portfolio Theory and Capital Asset pricing model
Description
Risk and risk aversion
Defining the return and risk of a portfolio Asset allocation decision
Portfolio diversification
Allocation Model CAPM and its extensions
Index models
Activities/Resources before session
. Reilly, Brown, . Leeds (2018) . «Investment analysis & portfolio management» , 11th ed. ed.
ISSN: 9781305262997
Chapter 6: An introduction to Portfolio Management + Appendix Chapter 7: Asset Pricing Model
Optional – Bodie, Kane, Marcus, Perrakis, Ryan, Chapters 5 & 6
Activities/Resources during session
Modern Portfolio Theory (MPT)
(5- Modern Portfolio Theory.pptx)
Activities/Resources after session
Suggested exercises in the book
Chapter 6 Reilly and Brown:
Questions: 1 – 15 Problems: 4 – 6, 8 – 10 Appendix A: Problem 1
Appendix B: Problem 1
Chapter 7 Reilly and Brown:
Questions: 1 – 6 Problems: 1 – 4, 5 – 6
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Additional Exercises on MPT
(CFA Lecture 5.pdf)
Solutions chap 6-7
(Solutions chap 6-7.zip)
6 – Modern Portfolio Theory and Capital Asset pricing model
Activities/Resources before session
. Reilly, Brown, . Leeds (2018) . «Investment analysis & portfolio management» , 11th ed. ed.
ISSN: 9781305262997
Chapter 6: An introduction to Portfolio Management + Appendix Chapter 7: Asset Pricing Model
Optional – Bodie, Kane, Marcus, Perrakis, Ryan, Chapters 5 & 6
Course Notes (See Session 5)
Activities/Resources during session
Exercises answered in class
(PracticeExercises Series 1.pdf)
Video clilps solutions should be available in the Yuja section (icone on the left part of this screen).
You need to be logged in Yuja with your zonecours ID (SSO) to access the clips (MPT Recap, Q1, Q2, Q3, Q4, Q5a, Q5b, Q6).
Activities/Resources after session
Optimal Portfolio Calculations (MPT)
(Excel Spreadsheet for Exercises.xls) Allows to verify your calculations
Exercices supplémentaire TMP anglais.pdf
(Exercices supplémentaire TMP anglais.pdf)
7 – Modern Portfolio Theory and Multifactor Models
Description
Risk and risk aversion
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Defining the return and risk of a portfolio
Standard deviation limits as a risk measure of a portfolio VaR (Value at Risk) concept
Asset allocation decision
Portfolio diversification
Allocation Model
CAPM and its extensions
Index model
APT and multifactorial models
Models with macroeconomic factors
Basic Factor Models
Activities/Resources before session
. Reilly, Brown, . Leeds (2018) . «Investment analysis & portfolio management» , 11th ed. ed.
ISSN: 9781305262997
Chapter 7 : Asset Pricing Models (7.4 – 7.5) Curriculum CFA Institute
Optional – CFA Institute curriculum level 2, Reading 39 : Using Multifactor Models
Activities/Resources during sess