COURSE NUMBER: MBA233.1

COURSE TITLE: Investments

UNITS OF CREDIT: 3 units

INSTRUCTORS: Christine Parlour

E-MAIL ADDRESS: parlour@haas.berkeley.edu

CLASS WEB PAGE LOCATION: http://bspace.berkeley.edu

MEETING DAY(S)/TIME: Mondays and Wednesdays, 4:30-6:00PM

COURSE TITLE: Investments

UNITS OF CREDIT: 3 units

PREREQUISITE(S): MBA203

CLASS FORMAT: Lectures + discussion

REQUIRED READINGS: Course reader

BASIS FOR FINAL GRADE: Midterm, Final and group assignments

ABSTRACT OF COURSE'S CONTENT AND OBJECTIVES:

This field uncovers relationships between financial assets. This is NOT a class about how to pick stocks. It is, however a course about how to pick portfolios. You can use your understanding of portfolio theory to make investments that are on average the best ones.

The philosophy behind Investment Analysis is the following: Markets are informationally efficient. Roughly speaking, this means that there is no such thing as a free lunch. Do not despair! If you understand pricing models and the logic of creating substitutes (two assets with identical cash flows), you can use your knowledge to identify and take advantage of arbitrage situations (on the rare occasions they arise). By understanding the risk/return trade--off you will see how the return to each asset is made up of the return to each type of risk that the asset is exposed to. Theoretical pricing models let you figure out what the important risks are and how much they are worth.

By the end of this class you will know how to construct a well--diversified portfolio. You will be able to price perfect substitutes, both in the fixed income (bond market) and the equity markets. Not only will you learn tools in this class, you will always learn how to think like a financial economist about practical problems and situations. These skills are important for jobs in the finance sector. They are also important for your own personal investing objectives.

BIOGRAPHICAL SKETCH:

Christine A. Parlour specializes in microstructure: the study of market design and trading strategies. She has worked at both the SEC and has been a member of the Nasdaq Economic Advisory board.