Investment Management

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This Course Guide has been taken from the most recent presentation of the course. It would be useful for reference purposes but please note that there may be updates for the following presentation.

FIN B385

Investment Management

Welcome to FIN B385 Investment Management.

FIN B385 Investment Management is a half-year, five-credit, required course for HKMU students seeking a Business Administration (BBA) degree. It introduces you to a wide spectrum of investment knowledge and techniques that are necessary for making sound investment decisions. The essentials of investing include a solid understanding of investment theories and principles; a good knowledge of available investment vehicles in both local and global markets; and an appropriate set of analytical techniques and strategies. With this in mind, this course aims to equip you with a good understanding of the elements of investments and the investment decision-making process based on modern investment theories and industry best practices. After studying the course, you are expected to be able to apply investment management tools in your daily life and make sound investment decisions.

Investing has always been popular in Hong Kong. Local news media and television provide ample financial information to the investment public. Nonetheless, the financial information from popular news media appears to be piecemeal and overly factual. In addition, the news media emphasizes common stock with little discussion on other investment topics. The aims of this course are to provide you with a systematic understanding of investment management, and an ability to critically analyse investment decisions. The tools for such analysis are provided in the form of understanding of the currently dominant (mainly US) investment theories and practices. Hong Kong-based examples of investment management, and where appropriate examples from the US and other societies, will be used to help you learn to manage your investments effectively.

The study units, readings and self-tests will help you master these topics and skills over a period of around 16 weeks.

This Course Guide tells you briefly what the course is about and how you can work your way through the material. For information on assignments, please refer to the Assignment File. For information on due dates and deadlines for work to be submitted, please refer to the Presentation Schedule (available on the Online Learning Environment).

After introducing the course aims and learning outcomes, this Course Guide provides:

  • information on course materials and the course textbook;
  • course assessment information regarding assignments and the oral presentation; and
  • information on tutorials and tutor support.

Course aims

The course aims to provide you with solid knowledge about investment management. It introduces the modern investment theories that provide economic rationales for making investment decisions.

 

Course learning outcomes

Upon completion of this course, you should be able to:

  1. Critically review modern portfolio theory and the efficient market hypothesis for their application in investment management.
  2. Devise investment strategies of stocks and bonds through different analytical methods and portfolio management skills.
  3. Critically analyse asset allocation strategies for managing investment portfolios in different market situations.

The table below gives an overview of the course — the study units, the number of weeks you are expected to spend on each one, and the scheduling of the assignments.

 

Table 1 Course organization

UnitTitleStudy time
(weeks)
Assessment activity
(end of unit)
1Overview of investment theory3 
2Efficient market hypothesis and asset pricing models3 
3Common stocks3Assignment 1
4Fixed income securities3 
5Portfolio management and introduction to derivatives3Assignment 2
 Revision1Presentation
 Total16 

 

FIN B385 builds on previously acquired accounting and quantitative skills. Your accounting background enables you to extract useful information from financial statements on which investment decisions are made. Your quantitative background enables you to structure your reasoning analytically in order to arrive at sound decision alternatives. If you feel rusty on either subject, please take some time to review the relevant course materials.

The time needed to complete all of the work involved in the course will differ from learner to learner. However, the estimated time you need to spend on the course is about 11 hours per week. This estimate includes time for reading the study units and the textbook, working on activities and self-tests, completing your assignments, undertaking the suggested reviews, attending tutorials and preparing for your oral presentation. Although you can deviate from the suggested schedule, you must successfully complete the assignments and presentation according to the schedule.

This section gives information about what materials are needed, and how the assignments and marking are arranged.

 

Materials

In addition to this Course Guide, please ensure that you have the following important course components:

  • Five study units
  • Set textbook (not provided by HKMU)
  • Assignment File

Study units

There are five units in FIN B385. The first two units provide discussion on the essential elements of investments and investment theories. These basic concepts and theoretical tools will be useful in understanding the investment management process. Units 3 and 4 focus on common stock and fixed income securities. We shall study the characteristics, mechanics, and pricing of common stocks and fixed income securities. Unit 5 provides descriptions of principles of portfolio management, active investment management and fundamentals of derivatives. Allocation strategies and performance evaluations will also be discussed in Unit 5.

 

Readings

Some additional readings are incorporated into the study units. The additional reading materials are mostly articles from scholarly journals or practitioner magazines. These provide you with examples of contemporary investment issues and current events and explain how they are addressed in real life situations, or how they are debated in academic circles. There are also excerpts from publications that describe some of the institutional details of Hong Kong’s financial markets.

These readings will be available online or provided as hard copies at the backs of the study units.

 

E-Library E-Reserve readings

You may be instructed to read articles in the E-Library E-Reserve. To read these items, go to the University’s E-Library and click on E-Reserve. Log in, click Accept/Agree on the Copyright Restrictions page, fill in the Course Code box, and click Search.

 

Set textbook

You are required to purchase the following set textbook:

Bodie, Z, Kane, A and Marcus, A J (2021) Essentials of Investments, 12th edn, McGraw-Hill LLC.

 

Assignment File

Assignment details for this course are contained in your Assignment File. The nature of these assignments is described in the ‘Assignments’ section below. You are required to complete your assignments and send them to your tutor in accordance with the timetable provided in the Presentation Schedule explained below.

 

Presentation Schedule

The Presentation Schedule for this course is available on the Online Learning Environment (OLE). In this schedule, you will see the times (due dates) by which your tutor should receive your assignments. Please note that you must submit all your assignments in time for them to reach your tutor by the dates shown.

 

Other media

You are required to have a financial calculator. Models such as HP12C, Texas Instrument BA II Plus or Casio FC-100 are ideal.

You are also required to have access to the Internet. In your textbook there is a website listing at the end of each chapter. You will be referred to the relevant listings in the Introduction of each study unit, in order to gather information and insight into the practices of investments and discussions from the World Wide Web.

 

Assessment

This course is designed to assist you in moving easily from the subject material to the assignments and presentation. You are expected to apply concepts and techniques introduced during the course when attempting the assignments. Most problems require qualitative and narrative responses.

The course carries two formal activities in student assessment: assignments and an oral presentation. Assignments serve as continuous assessment within the study period and contribute 80% of the total course marks. The other 20% are evaluated through an oral presentation. Assignments must be submitted to your tutor, via the OLE, for formal assessment according to the given due dates.

To be assured of achieving a pass result, you must obtain a pass for both the total course mark and the presentation mark.

 

Assignment

There are two written assignments for the course. Assignment 1 includes practical problems covering Units 1 and 2 and Assignment 2 contains an essay-type question which covers all units in the course. The assignments will help you better understand how the theories learned from the course can be applied to the real investment situations.

The total weighting of the assignments is 80% (each of the two assignments carries 40%). For details, please refer to the Assignment File, which will be made available on the OLE. You are required to complete the two assignments and submit them to your tutor via the OLE for evaluation and grading.

 

How to submit assignments

You must use word processing software (such as Microsoft Word) to prepare the assignments, and submit the assignments via the Online Learning Environment (OLE). All assignments must be uploaded to the OLE by the due date.

Failure to upload an assignment in the required format to the OLE may result in the score of the assignment being adjusted to zero.

 

Assignment extension policy

The assignment policy of the university as stated in the Student Handbook should be observed. Students are required to submit assignments for a course in accordance with the dates communicated by the course coordinator. Students may apply for a submission extension on the grounds of illness, accident, disability, bereavement or other compassionate circumstances.

Applications for extensions of up to seven days should be submitted to the tutor. The tutor shall consider valid and unexpected emergencies on an individual basis. Normally, documented proof of the extenuating circumstances is not required for extensions of up to seven days. The tutor shall decide and advise the student of the revised date for submission.

For extensions of over seven days, students should note the following:

  1. If students require an extension of more than seven days on the grounds of illness, accident, disability, bereavement or other compassionate circumstances, they are required to complete an ‘Application Form for Assignment Extension over seven days’ and submit it to the Course Coordinator.
  2. Supporting documents must be submitted along with the application for extension of over seven days to justify the claim.
  3. Applications for extension should normally be lodged before or on the due date.
  4. Applications are considered by:
    • the Course Coordinator for extensions of 8 to 21 days; and
    • the Dean for extensions of over 21 days.

After an assignment is submitted via the OLE, it is your responsibility to check that the assignment has been successfully submitted. Extension applications due to any problem with uploading will not be accepted. The University cannot accept any responsibility for assignments that are not received by your tutor due to any problem with submission via the OLE. As a precaution, you are advised to keep a copy of each assignment you submit.

According to the University’s policy, no extension of the due date will be allowed for the final assignment. This policy will be strictly enforced.
Any late submission of the final assignment will result in the score of the assignment being adjusted to zero.

 

Oral presentation

The presentation is compulsory and conducted on an individual basis. It accounts for 20% of the total course mark. During the presentation, you will have to present the contents of your Assignment 2 and will be asked questions about it.

You are required to attend the presentation according to the time slot assigned to you. More details about the presentation time will be provided by your tutor. If you are absent from the oral presentation, you will fail the course regardless of how you have performed in your assignments.

 

Assessment summary

The following table summarizes the assessment requirements for this course.

Assessment typeMarks
Two assignmentsAssignment 1 and Assignment 2
= 40% × 2 = 80%
Oral presentation20%
Total100%

 

Your final result in this course will depend on your performances in both the continuous assessment (assignments) and the oral presentation. In order to pass the course, you need to pass both the continuous assessment and the oral presentation. For more information on the University’s policies on assignments and examinations, please refer to Section 7 ‘Assignments and Examinations’ in the HKMU Student Handbook.

Case studies are a useful and increasingly popular form of learning and assessment in HKMU’s Lee Shau Kee School of Business and Administration. In this section we will look at why case studies are used and then suggest some learning strategies that you can use to approach case studies. We will also briefly discuss some problems that you may encounter as you learn from case studies.

 

What is a case study approach to learning?

One main purpose of a case study is to explore an issue or a number of issues in relation to an organization. The intention is to get you to carefully diagnose an organization; to focus on key problems, and to suggest how these might be resolved. Often the case is a real-life account of an organization which you are required to analyse in order to focus on a problem. Usually, the information that is provided is incomplete and you are often expected to observe developments in the organization over a period of time. The case study approach is an excellent opportunity to actively apply material that you have read and conceptual knowledge to the reality of an organization.

At HKMU, case studies may be used as part of assignments, exams, study units, or day-school exercises. You normally are given some information about a company (this could be both text and graphical information, such as figures and tables). You are then asked to think about some problems related to the company and to use concepts and apply theories that you have learned in your course to propose possible solutions for the company.

Let’s have a look at two kinds of case study questions that you might be asked to work through in your courses. The first example is quite structured, while the second is much more open-ended.

 

Two examples of case study questions

  1. Read the case study entitled ‘ABC Consultants’ and consider the following issues:
    • Using your understanding of the resource-based model, what measures could be taken to improve ABC’s returns?
    • Drawing on your broad understanding of the consultancy industry, assess ABC’s relative competitiveness and its profit potential.
    • To what extent do internal factors account for ABC’s financial weaknesses?
    • Based on your assessment of ABC’s financial weaknesses, formulate a new strategic intent and develop a mission statement for ABC.
  2. Read the case study entitled ‘XYZ Industries.’
    • Identify the key problems that are currently faced by XYZ’s management.
    • Propose viable solutions to these problems.

Why case studies?

As you can see from the above examples, a case study approach to learning requires a great deal of thinking and often will not easily yield a quick ‘wrong’ or ‘right’ answer. However, case studies are also good preparation for dealing with real-life business problems. Cases may be short and relatively simple, or longer and complex. The purpose is the same for both types: to give you an opportunity to develop your skills in analyzing the strengths and weaknesses of the organization under examination, to consider the processes at work within the organization, and to make decisions about future actions.

Case studies are not meant to replace textbooks, but rather to ask you to draw connections between theories and practice and to apply abstract ideas, concepts, and principles to specific concrete situations.
Consequently, case analysis develops a number of skills that are crucial in business. In particular, they help you to:

  • analyse complex, unstructured, sometimes ambiguous situations;
  • identify critical issues and problems;
  • question your own and others’ assumptions;
  • improve your problem-solving skills;
  • develop your ability to find alternatives and make informed decisions;
  • make decisions with incomplete information and think strategically;
  • self-educate yourself and draw on a broad range of resources and knowledge; and
  • present and justify recommendations in writing.

You may find that there are many possible ‘right’ answers to the questions in a case study. This illustrates that there is often no single best way to responsibly manage and solve real-life business problems.

 

Some guidelines for analysing case studies

The following strategies should help you to successfully analyse case studies:

 

1 Read the case and become familiar with the facts

First, skim read the case to obtain a general understanding of the main point(s). Highlight or underline the pertinent points as you read.

Read the case again, and this time note down critical facts (such as names, time sequences, and where events occurred). Try to understand how events have influenced decisions. Identify the important individuals or stakeholders, and try to assess the importance of supporting information in the case. How reliable is this supporting information? Are there any gaps in the information that is given?

Make a note of any questions that you have as you read the case.

 

2 Assess the context of the case

Try to understand the environment of the organization and the wider context of the case.

Ask yourself questions about:

  • The state of the organization
    What is the state of this organization: good, bad or in-between? Usually this involves thinking about interpersonal relationships, and assessing production or financial problems.
  • Key players and systems
    How do systems and people operate in this organization? Why do they operate like this? Are the systems undergoing change? How successful are the changes? Is there someone who could sabotage any future strategy? Is there someone who can ensure the success of a future strategy?
  • Significant trends
    How does this industry operate? What are the main or unique characteristics of the industry? What were they five or ten years ago, and what are they likely to be in the future? What impact are trends likely to have on the organization under investigation? How does this organization’s performance compare with that of competitors?
  • Constraints
    Clearly identify all constraints in the case. A constraint may be viewed as anything (usually beyond the control of the organization) that may prevent an otherwise feasible course of action from becoming a success. What is outside the control of individuals in the case study? For example, it is unlikely that any company or individual in Hong Kong could prevent a foreign government from imposing tariff barriers on imports.

A SWOT analysis is a good way to get a better understanding of the organization and the context or environment in which it is operating. A SWOT analysis considers the strengths and weaknesses of the organization, and the opportunities and threats which the organization faces in the external environment.

 

3 Recognize the case's symptoms

Read the case again and as you read, try listing all the symptoms of the case. The symptoms of a case are not the problems, but they may help you to identify the problems. Symptoms are all the things that are undesirable or that are not as expected. For example, falling sales could be a symptom of several problems such as poor market segmentation, poor product quality, or problems in a supply chain. At this stage of your analysis, you should just try to observe all the symptoms, and avoid prematurely identifying problems or suggesting solutions. Like a doctor who consults a patient, you first need to observe and note all the symptoms before you can give a definite diagnosis of the problem. Think about how the symptoms may be interrelated. Relationship diagrams, like the one below, may help you to see the relationships between symptoms.

 

4 Diagnose the case's problems

After you have a good sense of the symptoms, you’re ready to determine key issues that need to be analysed more closely. You are now diagnosing the situation, like a doctor diagnosing a patient’s symptoms. Ask yourself ‘what seems to be the trouble in this organization?’ and make a list of what you now perceive to be the key problem(s). You will probably need to go back to the details of the case and as you do this; you may add to or refine your list of potential problems.

If there are several problems, you need to order and prioritize them. You might want to number problems according to how you perceive their importance, or make a matrix, like the one below, which shows relationships between various criteria and each problem.

 

CriteriaProblem #1Problem #2Problem #3
Importance — What will happen if the problem is not addressed?   
Urgency — How quickly must this problem be solved?   
Centrality — To what extent does this problem cause others?   
Solvability — Can this problem actually be solved?   

 

Also try to establish if there are relationships or themes in common among the various problems. Perhaps different problems in your list are actually variations of a broader central problem.

Ask yourself what assumptions you have made about the case. Are these assumptions reasonable, and are they supported by the facts? Would other people objectively suggest the same problems, based on the facts that you have? Are you suggesting problems that are not supported by the facts of the case?

After you have considered and put into order the possible problems and questioned your assumptions relating to these problems, you should write a statement of the problems as you perceive them. Avoid suggesting solutions at this stage.

Once you have a problem statement, you need to find evidence in the case to support your problem diagnosis. Also, try to identify ideas, concepts and theories from your textbook and course units which help to explain what is happening in the case.

 

5 Formulate criteria for a 'good' solution and identify possible constraints to solutions

Before you propose a solution, you need to consider the characteristics of a ‘good’ solution. Obviously, your solution should bring benefits such as improved productivity, reduced costs or greater profits. However, it also needs to be viable and to accommodate the constraints that you have already identified, i.e. Is the solution legal? Is there a budget for this solution? Does it conflict with the organization’s culture?

Try to brainstorm alternative solutions. Aim to generate a broad and creative range of options and then try to rate each according to various criteria.

The following matrix demonstrates how this can be done.

 

 CostEase of implementationImpact on organization cultureImpact on profits
Option 1*******
Option 2*********
Option 3*******

 

Also refer to ideas, concepts and theories from your course materials as you consider and assess each possible solution.

It’s often wise to propose a solution that allows for plausible alternatives if it should fail. Managers use the term satisfice when they are considering acceptable alternative solutions, that is, the solution is able to satisfy the situation while also making some realistic sacrifices to existing constraints. Therefore, it is a satisficing rather than a maximizing solution.

Finally, don’t forget to consider the possibility of taking no action. What will actually happen if no action is taken? Are any (or all) of the solutions less viable than taking no action at all?

 

6 Recommend a viable solution

After you have assessed the merits and pitfalls of each alternative solution, select the best solution for the situation.

Remember that the solution needs to be viable. Can the recommended solution be introduced? Are there the resources and the willingness to implement it? Be realistic about what may work. Explain why it is the best solution within the constraints of the existing context and explain how it can be applied to the organization. Suggest a time-frame for the solution’s implementation.

Outline possible strategies for implementing your solution, either partially or completely. As many feasible courses of action as possible should be considered before you choose the one that seems the most likely to succeed. The more ideas you have, the greater your chance will be of finding a solution that will work well. The complexity of most organizational problems means that it is highly unlikely that one idea alone will correct the situation. Usually a combination of actions is required, and these need to be funded differently, timed carefully and staffed as necessary.

 

7 Present your solution as a written recommendation

Review your final solutions and then prepare a set of written recommendations. These should clearly outline your proposed solution in relation to the problems that you have identified. Your recommendations should also include details of why these solutions are the most appropriate given the circumstances and constraints of the case. Finally, you need to clearly state how and when your proposals will be implemented.

Your tutor and your course Assignment File can provide some guidelines on how to present your recommendations.

 

Some mistakes to avoid as you analyse cases

When you first tackle case studies, you should be careful to guard against the following mistakes:

  1. One of the most common mistakes made in case analysis is repeating or simply summarizing the facts of the case. Your tutor is already very familiar with the case details, so you do not have to restate them. You are required to use and analyse the facts, not repeat them. Your analysis should contain only enough case material to support your arguments. Therefore, be analytical!
  2. You may often be tempted to just deal with symptoms and ignore the causes of the problem. It is very important to analyse the background of the case (and the climate in which the events of the case unfold).
  3. Avoid discussing problems in isolation and do not overlook their interrelatedness. If you try to think in terms of ‘systems’ rather than in terms of individual problems, you are more likely to avoid this pitfall.
  4. Students often fail to state the assumptions underlying their analysis. If any important assumptions have been made, have you questioned them and are they reasonable and appropriate? Avoid selectively using and interpreting case material in order to justify a preconceived solution.
  5. Practical limitations and constraints may sometimes be overlooked. For example, a recommendation that a whole team be fired is probably unrealistic.
  6. A very common mistake is poor integration of the facts in the case with the concepts, principles, and theories in the textbook. Such integration is vital. Ask yourself if relevant theories from your course have been fully and constructively applied.
  7. Finally, recommendations are too often not spelled out in detail or are unrealistic. A timetable for implementing them is also often not given.

Analysing cases poses many challenges, and this is one reason the case study method is so rewarding. It is a very active form of learning. It offers you a risk-free opportunity to gain managerial and organizational experience and should greatly increase your confidence to make informed decisions in the real world.

Good luck and we hope you enjoy working through the cases that you encounter!

Tutors and tutorials

At the start of the course, you will be allocated a tutor who may be a practitioner in the field of finance/banking, or a teacher from one of Hong Kong’s tertiary institutions. Much of the communication you have with HKMU during the course will be with your tutor. Your tutor is responsible for marking and commenting on your assignments as quickly as possible, as well as taking a personal interest in your studies. Keep a copy of all assignments sent to your tutor. These will prove useful if you wish to refer to them during telephone conversations with your tutor, or if they get lost in the mail.

Do not hesitate to telephone your tutor for help, if:

  • you do not understand any part of the study units or the assigned readings;
  • you have any difficulty with self-tests or activities; or
  • you have a question or problem with assignments, with your tutor’s comments about them or with the grading of the assignment.

Tutors are responsible for the grades you receive on assignments. If you disagree with a mark, try to resolve the issue with your tutor before contacting the Course Coordinator. If you cannot complete all of your assignments or do the oral presentation, you should also contact your tutor to make alternative arrangements.

To assist you in this course, five two-hour tutorials will be organized with your assigned tutor. You will be notified of the dates, times and locations of these sessions, along with the name and phone number of your tutor, as soon as you are allocated a tutorial group. It is strongly recommended that you attend these tutorials. They will help you in your study of investment management and they will improve your chances of gaining higher marks. They also offer the opportunity to meet other learners studying through HKMU.

Tutors are required to start tutorial sessions on time. If a tutor fails to turn up 30 minutes after the scheduled starting time, students may assume that the session is cancelled and they should report the case to the Course Coordinator so that a make-up session can be arranged.

 

Online support

This course is supported by the Online Learning Environment (OLE). Students can find course materials and the latest course information from the OLE and use the discussion board to communicate with their tutors, the Course Coordinator and fellow students. Links will be provided to the main government sites relevant to this course. Email tutoring support will also be provided where appropriate.

FIN B385 Investment Management attempts to cover aspects of investment management that are of interest and relevance to learners. The course introduces various investment instruments, markets and analytical techniques, and places a strong emphasis on the conceptual foundations that underlie sound investment decisions, application to actual problems and relevance to the investment environment in Hong Kong. In addition, due to the widespread availability of computers and information technology, you will be able to practice what you have learned in this course at work and/or when making your own investments.

Over a period of 16 weeks, you will work through five study units, with support from regular tutorials, a seminar, contact with your tutor and the Online Learning Environment. You are required to buy a set textbook, which you will refer to for consolidation of the topics covered in the units. You will be able to assess your own progress during the course through regular formative self-tests. The summative assessment will take place through two assignments and an oral presentation.

By the time you have completed the course, you should have the confidence to apply the investment management tools in your daily life and make sound investment decisions. Good luck, and enjoy the course!

If you wish to defer your studies of this course until a later date, you should apply for deferment of studies. For the regulations governing deferment of studies, please refer to your Student Handbook. If you have applied for deferment of studies you should continue with your studies of this course and submit the required assignments until formal approval is given by the university. Should you have difficulties in submitting an assignment, you are advised to liaise with your Course Coordinator and apply for an assignment extension. Students who have been granted deferment of studies will not be allowed to submit assignments due before the date that their application for deferment of studies is received by the Registry.

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