Investments I: Fundamentals of Performance Evaluation

University of Illinois at Urbana-Champaign

finance   |   Advanced   |   30 Hours

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:
•\tExplain the tradeoffs between risk and return
•\tForm a portfolio of securities and calculate the expected return and standard deviation of that portfolio
•\tUnderstand the real-world implications of the Separation Theorem of investments
•\tUse the Capital Asset Pricing Model (CAPM) and 3-Factor Model to evaluate the performance of an asset (like stocks) through regression analysis
•\tEstimate and interpret the ALPHA (α) and BETA (β) of a security, two statistics commonly reported on financial websites
•\tDescribe what is meant by market efficiency and what it implies for patterns in stock returns and for the asset-management industry
•\tUnderstand market multiples and income approaches to valuing a firm and its stock, as well as the sensitivity of each approach to assumptions made
•\tConduct 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.

What skills will you gain?

valuation (finance)

investment

evaluation

Strategy

modeling

investment strategy

Finance

stock

market (economics)

performance