6150 - EQUITY PORTFOLIO MANAGEMENT

The course deals with methodologies to manage an equity portfolio. The first part of the course discusses strategic asset allocation as well as market timing decisions about the proportions to be invested in stocks and bonds while the second part of the course presents stock picking models i.e. models to pick stocks in relative terms. Students will learn how to apply such systematic methodologies i.e. how to define a financial strategy, to back-test it and to study the results of the back-test in statistical terms.

• preferences under uncertainty, distribution of returns for stocks and portfolios
• long run allocation betwen stocks and bonds
• the linear regression model
• risk factors and expected returns, arbitrage and multifactor models
• size and value strategies
• momentum strategies
• returns and characteristic
• mean reversion strategies
• pairs trading
• earnings strategies
• volume strategies

Written, no partial exam. Attendance of the course is expected.

• D.G. Luenberger, Investment science, Oxford University Press, 1998, pg. 173-187, 228-234 and 197-211
• R. Jagannathan, N. Kocherlakota, Why should older people invest less in stocks than younger people?, Federal Reserve Bank of Minneapolis Quarterly Review, Summer, 1996, pp. 11-23
• S.A. Ross, R.W. Westerfield, J. F. Jaffe, Corporate finance, Irwin, Boston, 1988, pg. 225-294
• G. Koop, Analysis of financial data, John Wiley, New York, pg. 49-100

Students are supposed to have basic knowledge of mathematics, statistics and basic Excel.