Investments I: Fundamentals of Performance Evaluation
In this course, we will discuss fundamental principles of trading off risk and return, portfolio optimization, and security pricing. We will study and use risk-return models such as the Capital Asset Pricing Model (CAPM) and multi-factor models to evaluate the performance of various securities and portfolios. Specifically, we will learn how to interpret and estimate regressions that provide us with both a benchmark to use for a security given its risk (determined by its beta), as well as a risk-adjusted measure of the security’s performance (measured by its alpha).
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- Level Foundation
- المدة 26 ساعات hours
- الطبع بواسطة University of Illinois Urbana-Champaign
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Offered by
عن
In this course, we will discuss fundamental principles of trading off risk and return, portfolio optimization, and security pricing. We will study and use risk-return models such as the Capital Asset Pricing Model (CAPM) and multi-factor models to evaluate the performance of various securities and portfolios. Specifically, we will learn how to interpret and estimate regressions that provide us with both a benchmark to use for a security given its risk (determined by its beta), as well as a risk-adjusted measure of the security's performance (measured by its alpha). Building upon this framework, market efficiency and its implications for patterns in stock returns and the asset-management industry will be discussed. Finally, the course will conclude by connecting investment finance with corporate finance by examining firm valuation techniques such as the use of market multiples and discounted cash flow analysis. The course emphasizes real-world examples and applications in Excel throughout. This course is the first of two on Investments that I am offering online ("Investments II: Lessons and Applications for Investors" is the second course). The over-arching goals of this course are to build an understanding of the fundamentals of investment finance and provide an ability to implement key asset-pricing models and firm-valuation techniques in real-world situations. Specifically, upon successful completion of this course, you will be able to: - Explain the tradeoffs between risk and return - Form a portfolio of securities and calculate the expected return and standard deviation of that portfolio - Understand the real-world implications of the Separation Theorem of investments - Use the Capital Asset Pricing Model (CAPM) and 3-Factor Model to evaluate the performance of an asset (like stocks) through regression analysis - Estimate and interpret the ALPHA (α) and BETA (β) of a security, two statistics commonly reported on financial websites - Describe what is meant by market efficiency and what it implies for patterns in stock returns and for the asset-management industry - Understand market multiples and income approaches to valuing a firm and its stock, as well as the sensitivity of each approach to assumptions made - Conduct specific examples of a market multiples valuation and a discounted cash flow valuation This course was previously entitled "Financial Evaluation and Strategy: Investments" and was part of a previous specialization entitled "Improving Business and Finances Operations", which is now closed to new learner enrollment. "Financial Evaluation and Strategy: Investments" received an average rating of 4.8 out of 5 based on 199 reviews over the period August 2015 through August 2016. You can view a detailed summary of the ratings and reviews for this course in the Course Overview section. This course is part of the iMBA offered by the University of Illinois, a flexible, fully-accredited online MBA at an incredibly competitive price. For more information, please see the Resource page in this course and onlinemba.illinois.edu.الوحدات
About the Course and Your Classmates
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3
Videos
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8
Readings
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1
Quiz
3
Videos
- Course Introduction
- Learn on Your Terms
- The Impact of the Gies Community
8
Readings
- About this Course: Ratings and Reviews
- Syllabus
- Video Lecture Transcripts
- Scott's Advice on How to View and Take This Course
- Excel Instructions for Installing Solver and Data Analysis
- Options for Completing Assignments without Excel
- About the Discussion Forums
- Online Education at Gies College of Business
1
Quiz
- Orientation Quiz
About Your Classmates
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2
Readings
2
Readings
- Getting to Know Your Classmates
- Updating Your Profile
Module 1 Information
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3
Readings
3
Readings
- Module 1 Overview
- Module 1 Readings
- Module 1 Spreadsheets
Lesson 1-1 Objectives and Overview
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1
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1
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- Objectives and Overview
Lesson 1-2 Investments Toolkit
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7
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7
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- Objectives and Assumptions of Classical Finance
- Why Discount?
- Different Return Measures
- Firm Characteristics Relevant for Investments
- Zero-Cost Portfolio
- Statistical Techniques & Excel
- What We've Learned
Lesson 1-3 Historical Returns in the U.S.
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- Historical Returns in the U.S.
Lesson 1-4 Return and Risk: Intro to Portfolios
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- Return and Risk: Intro to Portfolios
Lesson 1-5 Portfolio Choice in General Settings
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5
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5
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- Objectives and Source of Data for Examples
- Asset Allocation with One Risky and One Risk-Free Asset
- Asset Allocation with Two Risky Assets
- Real-World Example of a Dominated Asset
- What We've Learned
Module 1 Review and Graded Activities
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- Module 1 Review
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- Module 1 Quiz
OPTIONAL Lesson 1-6 Assignment 1 and Discussion
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- OPTIONAL and UNGRADED ASSIGNMENT 1: Portfolio Choice When Change Correlations
- OPTIONAL: DISCUSSION OF ASSIGNMENT 1: Portfolio Choice When Change Correlations
OPTIONAL Lesson 1-7 Calculating Efficient Portfolios of Risky Assets
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4
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- OPTIONAL: Objectives
- OPTIONAL: Example 1: Calculating Efficient Portfolios of Risky Assets
- OPTIONAL: Example 2: Calculating Efficient Portfolios of Risky Assets
- OPTIONAL: What We've Learned
OPTIONAL Lesson 1-8 Calculating More Efficient Portfolios
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- OPTIONAL and UNGRADED ASSIGNMENT 2 (Lesson 1-8): Calculating More Efficient Portfolios
- OPTIONAL: DISCUSSION OF OPTIONAL and UNGRADED ASSIGNMENT 2 (Lesson 1-8): Calculating More Efficient Portfolios
Module 2 Information
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3
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- Module 2 Overview
- Module 2 Readings
- Module 2 Spreadsheets
Lesson 2-1 Objectives and Overview
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1
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- Objectives and Overview
Lesson 2-2 Separation Theorem of Investments
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4
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4
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- Objectives
- Final General Portfolio Example and Tangency Portfolio
- Two-Fund Separation Theorem and Applications
- What We've Learned
Lesson 2-3 Examples of Reducing Portfolio Risk
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- Examples of Reducing Portfolio Risk
Lesson 2-4 Capital Asset Pricing Model (CAPM)
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- Objectives
- Development of the CAPM
- The CAPM and BETA
- The CAPM and ALPHA
- What We've Learned
Lesson 2-5 Applications of CAPM
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5
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- Objectives
- Practice Problem & Introduction to Interpreting CAPM Regressions
- CAPM Example 1: Coca Cola
- CAPM Example 2: Balanced Fund
- How to Estimate CAPM and What We've Learned
Lesson 2-6 Evaluation of Small-Value Stock Investment Strategy, 1927-2014
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- PREPARING for Evaluation of the Small-Value Stock Investment Strategy, 1927-2014
- RESULTS from Evaluation of the Small-Value Stock Investment Strategy, 1927-2014
Module 2 Review and Graded Activities
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1
Quiz
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PeerReview
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Peer Review
- Assignment 3
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- Module 2 Review
- ASSIGNMENT 3 (Lesson 2-7): Analyzing & Identifying Three Mystery Securities
- DISCUSSION OF ASSIGNMENT 3 (Lesson 2-7): Analyzing & Identifying Three Mystery Securities
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- Module 2 Quiz
Module 3 Information
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3
Readings
3
Readings
- Module 3 Overview
- Module 3 Readings
- Module 3 Spreadsheets
Lesson 3-1 Objectives and Overview
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- Objectives and Overview
Lesson 3-2 Testing the CAPM & Market Anomalies
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7
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- Objectives and Uses of CAPM
- OPTIONAL: Testing the CAPM
- OPTIONAL: Defending the CAPM
- Market Anomalies: Small-Firm and Value Effects
- Interpretation of Market Anomalies
- OPTIONAL: Investigating "Long Value Short Growth" Strategy
- What We've Learned
Lesson 3-3 Multi-Factor Models and Matching
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- Objectives
- Multi-Factor Models
- Matching
- What We've Learned
Lesson 3-6 Market Efficiency
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- Market Efficiency
Module 3 Review and Graded Activities
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3
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Quiz
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PeerReview
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Peer Review
- Assignment 4
3
Videos
- Module 3 Review
- ASSIGNMENT 4 (Lesson 3-7): Analysis and Recommendation of 50 Balanced Funds, 1995-2014
- DISCUSSION OF ASSIGNMENT 4 (Lesson 3-7): Analysis and Recommendation of 50 Balanced Funds, 1995-2014
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- Module 3 Quiz
OPTIONAL: Lesson 3-4 Use Domestic or Global Factors?
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- OPTIONAL: Use Domestic or Global Factors?
OPTIONAL: Lesson 3-5 Return-Risk Model Used by Chief Financial Officers (CFOs)
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- OPTIONAL: Return-Risk Model Used by Chief Financial Officers (CFOs)
Module 4 Information
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- Module 4 Overview
- Module 4 Readings
Lesson 4-1 Objectives and Overview
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- Objectives and Overview
Lesson 4-2 Perpetuity Valuation with Simple Application to S&P 500
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4
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4
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- Objectives
- Formula for Valuing a Perpetuity
- Real-World Examples and Perpetuity Problems
- What We've Learned
Lesson 4-3 Valuation Primer: Market & Income Approaches
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7
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- Objectives
- Market Multiples Approach to Valuation
- Income Approach to Valuation: Introduction
- Income Approach to Valuation: Discount Rate
- Income Approach to Valuation: Cash Flows
- Income Approach to Valuation: Terminal Value, Price-to-Earnings Ratio, & Discounting of Cash Flows
- Fudge Factors to Valuation and What We've Learned
Lesson 4-6 Discounted Cash Flow Valuation Example: Pension Plan Liabilities
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5
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5
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- Objectives
- Defined-Benefit (DB) Pension Plan Liabilities and Their Valuation
- Valuing a Stream of Fixed Liabilities
- Investment Policy of Pension Benefit Guaranty Corporation (PBGC)
- What We've Learned
Module 4 Review and Graded Activities
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1
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Quiz
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- Module 4 Review
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- Module 4 Quiz
OPTIONAL: Lesson 4-4 Caution in Projecting Firm Discount Rates
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- OPTIONAL: Objectives
- OPTIONAL: Microsoft Example
- OPTIONAL: Betas of Small & Large Firms and Betas Across Industries
- OPTIONAL: What We've Learned
OPTIONAL: Lesson 4-5 Caution in Projecting Firm Growth Rates
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- OPTIONAL: Caution in Projecting Firm Growth Rates
OPTIONAL: Lesson 4-7 Market Multiples Valuation Example: Google at Its Initial Public Offering (IPO)
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- OPTIONAL: Objectives
- OPTIONAL: Valuation of Google at Its Initial Public Offering (IPO): First Attempt
- OPTIONAL: Valuation of Google at Its Initial Public Offering (IPO): Digging Deeper
- OPTIONAL: What We've Learned
Course Conclusion
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- Course Conclusion
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- Congratulations on completing the course!
- Get Your Course Certificate
Auto Summary
"Investments I: Fundamentals of Performance Evaluation" is a comprehensive course designed for individuals interested in mastering the essentials of investment finance within the domain of Business & Management. This foundational course, instructed by the University of Illinois, delves into the principles of risk and return tradeoffs, portfolio optimization, and security pricing. The curriculum covers key models such as the Capital Asset Pricing Model (CAPM) and multi-factor models, equipping learners with the skills to evaluate securities and portfolios through regression analysis. Participants will learn to estimate and interpret beta and alpha values, understand market efficiency, and explore firm valuation techniques, including market multiples and discounted cash flow analysis. Real-world examples and Excel applications are integral to the learning experience. Structured over 1560 minutes, this course is suitable for those at a foundational level and is available on the Coursera platform. As part of the iMBA program, it offers a flexible, cost-effective path to an accredited online MBA. A subscription to the Starter plan provides access to the course content. Ideal for aspiring investors and finance professionals, the course aims to build a robust understanding of investment fundamentals and practical application of asset-pricing models and valuation techniques. Join this engaging and informative course to enhance your investment acumen and apply these principles in real-world scenarios.
Gies College of Business, University of Illinois