INV
Investment
A nineteen-chapter Investment course covering securities markets, portfolio theory, asset pricing, market efficiency, and fixed-income valuation. Each chapter may be viewed or downloaded for personal study, classroom preparation, and professional reference.
- Instructor
- Dr. Abenet Yohannes, Ph.D.
- Institution
- Kuraz Consulting
- Course code
- INV
- Chapters
- 19 · PDF
The course introduces the investment environment and the instruments traded in it, then builds systematically through securities markets and pooled investment vehicles to the measurement of risk and return, efficient diversification, asset pricing models, market efficiency and behavioural finance, bond valuation and portfolio management, macroeconomic, industry and equity analysis, financial statement analysis, options and futures, portfolio performance evaluation, and international investing. Emphasis is placed on applying investment theory to real portfolio construction, security selection, and risk-management decisions.
Course overview, outcomes and enrolmentCourse materials
Chapters
Each chapter opens as a PDF in a new tab and can be downloaded for personal study and classroom learning.
- Chapter 1
Introduction to Investments
Defines the investment process, the distinction between real and financial assets, the role of financial markets and intermediaries, and the trade-off between risk and expected return that underpins every investment decision.
Learning objectives
- Distinguish real assets from financial assets and explain the role of each.
- Describe the investment process from objective setting to portfolio review.
- Explain the functions of financial markets and intermediaries.
- Outline the risk-return trade-off and the meaning of an efficient market.
Prerequisites
- Basic understanding of business finance and financial statements.
After this chapter: You will be able to describe how investment markets work and frame an investment decision in risk-return terms.
Open or download Chapter 1 (PDF) - Chapter 2
Asset Classes and Financial Instruments
Surveys the main asset classes — money-market instruments, bonds, equities, and derivatives — together with their pricing conventions, market indexes, and the characteristics that distinguish them.
Learning objectives
- Describe money-market instruments and their yield conventions.
- Compare government, corporate, and mortgage-backed fixed-income securities.
- Explain the features of common and preferred equity.
- Interpret major market indexes and describe basic derivative contracts.
Prerequisites
- Chapter 1 — the investment process and market structure.
After this chapter: You will be able to identify the instrument suited to a given investment objective and read its quoted terms.
Open or download Chapter 2 (PDF) - Chapter 3
Securities Markets
Explains how securities are issued and traded: primary-market issuance and IPOs, secondary-market trading mechanisms, order types, margin and short positions, trading costs, and market regulation.
Learning objectives
- Explain how firms issue securities in the primary market.
- Compare dealer, auction, and electronic trading venues.
- Place and interpret market, limit, and stop orders.
- Compute returns on margin purchases and short sales.
- Describe the regulatory framework protecting investors.
Prerequisites
- Chapter 2 — asset classes and instruments.
After this chapter: You will be able to execute and evaluate trades with an understanding of costs, leverage, and regulatory constraints.
Open or download Chapter 3 (PDF) - Chapter 4
Mutual Funds and Other Investment Companies
Covers pooled investment vehicles: open- and closed-end funds, exchange-traded funds, net asset value, fee structures, tax treatment, and the evidence on fund performance.
Learning objectives
- Distinguish open-end, closed-end, and exchange-traded funds.
- Compute net asset value and fund returns net of fees.
- Assess the effect of expense ratios and loads on long-run returns.
- Interpret evidence on the persistence of fund performance.
Prerequisites
- Chapter 3 — how securities are traded.
After this chapter: You will be able to compare pooled investment products on cost, structure, and realistic expected performance.
Open or download Chapter 4 (PDF) - Chapter 5
Risk and Return
Develops the measurement of investment risk and return: holding-period returns, real versus nominal returns, expected return and variance, the historical record, and the risk premium available to investors.
Learning objectives
- Compute holding-period, arithmetic, and geometric returns.
- Adjust nominal returns for inflation.
- Measure risk with variance, standard deviation, and downside measures.
- Interpret the historical record of returns across asset classes.
- Explain the risk premium and the allocation between risky and risk-free assets.
Prerequisites
- Comfort with basic statistics: mean, variance, and probability distributions.
After this chapter: You will be able to quantify the expected return and risk of an asset and set a defensible risk-free/risky split.
Open or download Chapter 5 (PDF) - Chapter 6
Efficient Diversification
Introduces portfolio theory: covariance and correlation, the gains from diversification, the efficient frontier of risky assets, the optimal risky portfolio, and single-index models of return.
Learning objectives
- Compute portfolio expected return, variance, covariance, and correlation.
- Explain how diversification eliminates firm-specific risk.
- Construct the efficient frontier and identify the optimal risky portfolio.
- Apply a single-index model to estimate systematic and unsystematic risk.
Prerequisites
- Chapter 5 — risk and return measurement.
After this chapter: You will be able to build a diversified portfolio that maximises expected return for a chosen level of risk.
Open or download Chapter 6 (PDF) - Chapter 7
Capital Asset Pricing and Arbitrage Pricing Theory
Presents the CAPM and its assumptions, beta and the security market line, the treatment of mispriced assets, and multifactor alternatives including arbitrage pricing theory and the Fama-French factors.
Learning objectives
- State the assumptions and implications of the CAPM.
- Estimate beta and use the security market line to set required returns.
- Identify over- and under-priced securities using alpha.
- Explain arbitrage pricing theory and multifactor models.
Prerequisites
- Chapter 6 — diversification and the efficient frontier.
After this chapter: You will be able to estimate a required rate of return for a security and test whether it is fairly priced.
Open or download Chapter 7 (PDF) - Chapter 8
The Efficient Market Hypothesis
Examines the weak, semi-strong, and strong forms of market efficiency, the implications for active and passive strategies, event-study methodology, and the documented anomalies that challenge the hypothesis.
Learning objectives
- Distinguish the three forms of market efficiency.
- Explain the implications of efficiency for portfolio management.
- Interpret event studies of information release.
- Evaluate the evidence on market anomalies and predictability.
Prerequisites
- Chapter 7 — asset pricing models.
After this chapter: You will be able to judge whether an active strategy is justified on the available evidence.
Open or download Chapter 8 (PDF) - Chapter 9
Behavioral Finance and Technical Analysis
Explores behavioural critiques of market efficiency — information-processing errors, behavioural biases, and limits to arbitrage — alongside the tools and evidence of technical analysis.
Learning objectives
- Describe the main information-processing and behavioural biases.
- Explain the limits to arbitrage that allow mispricing to persist.
- Apply common technical indicators and describe their assumptions.
- Assess the empirical evidence on behavioural and technical strategies.
Prerequisites
- Chapter 8 — the efficient market hypothesis.
After this chapter: You will be able to recognise behavioural biases in your own decisions and evaluate technical claims critically.
Open or download Chapter 9 (PDF) - Chapter 10
Bond Prices and Yields
Covers fixed-income valuation: bond characteristics and indentures, pricing between coupon dates, yield to maturity and yield to call, realised compound return, the term structure of interest rates, and default risk.
Learning objectives
- Describe bond features, indentures, and innovations in the bond market.
- Price a bond and compute yield to maturity and yield to call.
- Distinguish yield measures and compute realised compound return.
- Explain the term structure of interest rates and interpret yield curves.
- Assess default risk using ratings and credit analysis.
Prerequisites
- Chapter 2 — fixed-income instruments; time value of money.
After this chapter: You will be able to value a bond, interpret its yield measures, and assess its interest-rate and credit risk.
Open or download Chapter 10 (PDF) - Chapter 11
Managing Bond Portfolios
Develops active and passive fixed-income strategies: interest-rate sensitivity, duration and its determinants, convexity, immunisation of liabilities, cash-flow matching, and active bond selection.
Learning objectives
- Explain the determinants of a bond's interest-rate sensitivity.
- Compute Macaulay and modified duration and use them to estimate price changes.
- Adjust duration estimates for convexity.
- Immunise a liability stream using duration matching or cash-flow matching.
- Compare passive and active fixed-income strategies.
Prerequisites
- Chapter 10 — bond prices, yields, and the term structure.
After this chapter: You will be able to measure a bond portfolio's interest-rate risk and structure it against a defined liability or view.
Open or download Chapter 11 (PDF) - Chapter 12
Macroeconomic and Industry Analysis
Applies top-down analysis to security selection: the global and domestic macro environment, fiscal and monetary policy, business cycles, sector rotation, and industry structure and life cycle.
Learning objectives
- Assess how global and domestic macro conditions affect asset returns.
- Explain the transmission of fiscal and monetary policy to markets.
- Relate the business cycle to sector performance and rotation strategies.
- Analyse industry structure, life cycle, and sensitivity to the cycle.
Prerequisites
- Chapter 5 — risk and return; basic macroeconomics.
After this chapter: You will be able to build a top-down view that narrows the search for attractive sectors and industries.
Open or download Chapter 12 (PDF) - Chapter 13
Equity Valuation
Covers the valuation of common stock: book value versus intrinsic value, dividend discount models, growth opportunities, price-earnings multiples, free cash-flow models, and aggregate market valuation.
Learning objectives
- Distinguish book, market, liquidation, and intrinsic value.
- Apply constant-growth and multistage dividend discount models.
- Value the present value of growth opportunities.
- Interpret and apply price-earnings and other multiples.
- Value a firm using free cash flow to the firm and to equity.
Prerequisites
- Chapter 12 — macroeconomic and industry analysis.
After this chapter: You will be able to estimate the intrinsic value of a share and compare it against the market price.
Open or download Chapter 13 (PDF) - Chapter 14
Financial Statement Analysis
Uses reported financial statements for investment decisions: the major statements, return on equity and financial leverage, DuPont decomposition, ratio analysis, comparability problems, and the quality of earnings.
Learning objectives
- Read the income statement, balance sheet, and cash-flow statement from an investor's perspective.
- Decompose return on equity using the DuPont system.
- Compute and interpret profitability, turnover, liquidity, and leverage ratios.
- Identify comparability problems arising from accounting choices.
- Assess the quality of reported earnings.
Prerequisites
- Chapter 13 — equity valuation; introductory accounting.
After this chapter: You will be able to convert reported statements into evidence about a firm's economic performance and value.
Open or download Chapter 14 (PDF) - Chapter 15
Options Markets
Introduces option contracts and markets: calls and puts, contract terms and trading mechanics, payoff and profit profiles, protective puts, covered calls, spreads and straddles, and optionlike securities.
Learning objectives
- Describe call and put contracts, their terms, and how they trade.
- Draw payoff and profit diagrams at expiration.
- Construct protective puts, covered calls, collars, spreads, and straddles.
- Identify optionlike features embedded in other securities.
Prerequisites
- Chapter 2 — asset classes and financial instruments.
After this chapter: You will be able to design an option position that matches a defined market view or hedging need.
Open or download Chapter 15 (PDF) - Chapter 16
Option Valuation
Presents the determinants of option value: intrinsic and time value, restrictions on values, binomial pricing, the Black-Scholes formula, implied volatility, and the use of the hedge ratio in portfolio insurance.
Learning objectives
- Explain the six determinants of an option's value.
- Price options using a binomial tree.
- Apply the Black-Scholes formula to European calls and puts.
- Interpret implied volatility and put-call parity.
- Use the hedge ratio for delta hedging and portfolio insurance.
Prerequisites
- Chapter 15 — options markets and payoff structures.
After this chapter: You will be able to value an option and hedge a position using its sensitivity to the underlying asset.
Open or download Chapter 16 (PDF) - Chapter 17
Futures Markets and Risk Management
Covers forward and futures contracts: the mechanics of trading and margining, the basis, spot-futures parity, and the use of stock index, interest-rate, foreign-exchange, and commodity futures to manage risk.
Learning objectives
- Describe futures contract terms, clearing, and margin mechanics.
- Distinguish forwards, futures, and swaps.
- Apply spot-futures parity to detect arbitrage.
- Hedge equity, interest-rate, currency, and commodity exposures with futures.
Prerequisites
- Chapter 15 — derivative fundamentals.
After this chapter: You will be able to construct a futures hedge for an identified exposure and evaluate its basis risk.
Open or download Chapter 17 (PDF) - Chapter 18
Portfolio Performance Evaluation
Explains how investment performance is measured and attributed: time- and dollar-weighted returns, risk-adjusted measures, market timing, style analysis, and performance attribution procedures.
Learning objectives
- Compute time-weighted and dollar-weighted rates of return.
- Apply the Sharpe, Treynor, Jensen, and information ratios.
- Evaluate evidence of market-timing ability.
- Attribute performance to asset allocation, sector, and security selection.
- Apply style analysis to identify a manager's exposures.
Prerequisites
- Chapters 6 and 7 — portfolio theory and asset pricing models.
After this chapter: You will be able to judge whether a portfolio's returns reflect skill, risk-taking, or market exposure.
Open or download Chapter 18 (PDF) - Chapter 19
International Investing
Examines global portfolios: the world equity market, exchange-rate risk and its hedging, country and political risk, international diversification benefits, and performance attribution across countries and currencies.
Learning objectives
- Describe the composition of world equity and bond markets.
- Measure and hedge exchange-rate risk in foreign holdings.
- Assess country, political, and sovereign credit risk.
- Evaluate the diversification benefits and limits of international investing.
- Attribute international portfolio performance across currency, country, and stock selection.
Prerequisites
- Chapter 18 — portfolio performance evaluation.
After this chapter: You will be able to construct and evaluate an internationally diversified portfolio with explicit currency decisions.
Open or download Chapter 19 (PDF)
These teaching materials were prepared by Dr. Abenet Yohannes, Ph.D., for educational purposes. Students may download and use them for personal study and classroom learning.
Materials may be updated periodically; students should use the latest version available on this page. Questions about the course can be sent to abenetyohannes@gmail.com.
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