Portfolio Management and Mutual Funds – Course Handout

Semester IV Credits: 3
Course Instructor: VDMV Lakshmi
Office: F-205; Email: vdmvlakshmi@ibsindia.org Ph: 09490178397
Course Objectives: The objective of Portfolio Management and Mutual Fund course is to provide students an overview of securities,
market, trading process and analytical techniques of designing investment portfolios. The focus of portfolio design will be on
diversification rather than finding the mispriced securities.

Learning Outcome:
By the end of the course, student will learn:
1. About financial markets, portfolios, mutual funds and hedge funds, and the trading process.
2. About asset allocation and process for creating optimal risky portfolios.
3. How to determine risk-appropriate expected returns on investments and measure the investment performance of a portfolio.

Recommended Text:
 Modern Portfolio Theory & Investment Analysis by Elton, Gruber, Brown and Goetzmann, Wiley India (EGBG)
 Investments – Bodie, Kane, Marcus and Mohanty (BKMM)
 Investment Analysis & Portfolio Management – Reilly & Brown (RB)

Sessi Detailed Syllabus Chapters in Chapters in Cases / Papers/Tool to be Discussed

ons EGBG BKMM
3 Introduction to Portfolio Management, Characteristics of Chapter 1, 4 &5  Hewlettee Foundation
Opportunity Set, Decision under Certainty, Characteristics of  Demonstration through Excel
Portfolio, Diversification, Risk and Return characteristics
4 Minimum Variance Portfolio, Efficient Frontier (with and Chapter 6,7 & 9 Chapter 7 &  Demonstration through Excel
without short sales), Single Index Model, Beta Estimation 8
and Forecasting, Portfolio Optimization - Markowitz risk
return optimization
3 Sharpe’s optimization, Lintner’s method of Short Sales, Chapter 2 (RB)  Demonstration through Excel
Asset Allocation & Risk Profiling Questionnaires, Utility Chapter 11&12
Analysis – Absolute and Relative Risk Aversion;
1 NCP-I
4 Risk Tolerance functions , Asset Pricing – CAPM (Basic & Chapter 13, 14 & Chapter 9,  Demonstration through Excel
Non Standard forms), APT – Principle of No Arbitrage, 16 10, & 13
Equilibrium model, Estimation,

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 Portfolio Management and Mutual Funds – Course Handout

2 Comparison with Multi Index model, Fama French 3 factor Chapter 8 &12 Portfolio Selection Models: Comparative
model, Other Portfolio Selection Models – Geometric Mean analysis and application to the Brazilian
and Safety First Stock Market (Research Paper)
2 Portfolio Revision – Constant Dollar Value Plan, Constant Excel based exercise/simulation
Ratio Plan, Variable Ratio Plan
2 Equity Portfolio Management Strategies – Active v/s Passive Chapter 27 Reilly and  Investment management at
Management Strategies, Index Funds, Customized funds, Brown Harvard management company
Core & Satellite Portfolios Chapter 16
1 NCP-II
3 Passive portfolio management Strategy, Style Analysis, Chapter 25 Chapter 24
Attribution Analysis, Evaluation of actively managed
portfolios, Benchmark based performance evaluation,
Strategic, Integrated and Tactical Asset Allocation
3 Evaluation of Portfolio Performance – Return based (Money Chapter 25  Measuring mutual fund
Weighted v/s Time Weighted), Early and Composite performance
Portfolio Performance measures – Sharpe’s ratio, Treynor’s
ratio, Jensen’s alpha, Sortino ratio Fama’s decomposition of
overall return, Market timing ability, Stock selection ability
2 Bond Portfolio Management – Duration, Shift and Chapter 21 &22 Simulation and excel based exercise
Immunization, Passive and Active Strategies in managing
bond portfolio
1 NCP-III
2 Mutual Funds Organization strategy, Hedge Funds, Ethics Chapter 24  Asset Management Industry
and regulation of Professional Asset Managements (RB)  ETF at Vanguard(A)
 Introduction to Mutual Funds
(Note)

Evaluation Plan
COMPONENTS WEIGHTAGE
Class Participation 30%
NCP-Exam 30%
Comprehensive End Sem Examination 40%
TOTAL 100%

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 Portfolio Management and Mutual Funds – Course Handout

Consultation Hours: 4:20 PM to 5.35 PM on Every Tuesday

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