Master's Programme in Business Administration (5 years)
Language of instruction
Knowledge of math calculus and basics of optimization, statistics, and R programming. Builds upon parallel courses: ME-431-1 Quantitative Methods in Finance and SE-419-1 Financial Econometrics
Upon successful completion of this course the students should be able to
Discuss the trade-off between the risk and reward
Explain the optimal capital allocation between the risky and risk-free assets
Master the mathematics of mean-variance portfolio theory and construction of efficient portfolios
Compute and analyze financial asset returns
Construct mean-variance efficient portfolios using real financial data
Fully understand the mathematics of the capital market equilibrium including the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT)
Estimate the single index and multifactor models using ordinary least squares
Evaluate and compare performances of financial portfolios
The aim of this course is to provide a detailed treatment of the main theoretical foundations of modern investment theory and give students necessary skills in applying theoretical models using real-life data. On the theoretical side, the course presents in-depth coverage of the relationship between the risk and return, mean-variance portfolio theory, Capital Asset Pricing Model (CAPM), Arbitrage Pricing Theory (APT), and portfolio performance evaluation. A particular emphasis is placed on the derivation of the theoretical asset pricing models and a rigorous mathematical argumentation. On the practical side, using the open source R statistical programming language, the students learn how to retrieve and analyse financial data, implement all theoretical models considered in the course, and evaluate the performance of financial portfolios.
The course consists of lectures and group-work sessions. Estimated workload is about 200 hours.
Approved mandatory assignments. More information is available in Canvas.
Assessment methods and criteria
Individual written assignment (home exam) counts for 40 %, and 3-hour written examination counts for 60 % of the final grade. Grading by letters.
End of course evaluation in accordance with the quality system for education, chapter 4.1.