AF6006 - Investment Management: Rational and Irrational Markets

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What will I learn on this module?

The module aims to provide you with the knowledge and skills of applying a variety of quantitative and financial tools to construct, rebalance and evaluate portfolio consisting of financial assets mainly equities. The module is organised within the themes of rational and irrational decision making in investments (A Nobel Prize was awarded in 2013 to Eugene Fama and Robert Shiller for their contributions in these areas). The module delivers on Fama’s claim of markets efficiency, with people incorporating all available information into prices. It then extends onto Shiller’s view that investors, being human, can be swayed by psychology. Therefore you will learn the psychological influence and market efficiency alongside principles in the context of investment in real world financial assets. You will be exposed to a wide range of techniques for use in rebalancing, comparing and analysis and evaluation of portfolio made of financial assets. Furthermore, you will gain practical understanding of various aspects of asset allocation, portfolio management strategies and important behavioural issues affecting your portfolio choice. The module is delivered to you using weekly lectures and IT workshops, the workshops principally concentrate on the development of your trading software and excel spreadsheet skills.
Overall within the module you will explore the assumptions of rationality and irrationality in investments and their impact on decision-making. Within this module, you will cover nine main topics:
• Investment Process and Asset Allocation
• Portfolio Theory and Diversification
• Capital Asset Pricing and Arbitrage Pricing Theory
• Efficient Market Hypothesis
• Equity Valuation
• Chartists and Fundamental Analysis
• Portfolio Evaluation
• Behavioural Finance
• Irrationality Biases, Bubbles and Herd behaviour

How will I learn on this module?

The weekly lectures will provide you with a theoretical underpinning of the module content, supported by weekly workshop in the NBS trading room which will give you an opportunity to practice the various techniques learnt, allowing you to build up a proficiency of portfolio management. You will also learn the theoretical concepts through activities in Microsoft-Excel using real world financial data.

There will be a number of additional exercises housed on the module’s e-learning portal that will permit you to undertake further practice independently. The module has a supporting reading list that provides you with an opportunity to see how the various theories and techniques are applied and how the choice of strategies and investment need and constraints shape the managed portfolio.

Your directed study will support the work you have undertaken in the contact sessions. You will be expected to keep up-to-date with your workshop exercises. In addition, you will be set a selection of exercises to complete. To aid with self-assessment of the progress, the solutions or examples to these exercises will be made available to you on the e-learning portal.
Independent learning time is set aside for learning activities, self-identified by you, to gain a deeper and broader knowledge of the subject. You may complete the review exercises, work with the electronic support tools (such as recordings of IT applications), review past assessment answers or undertake further reading.
The problem solving nature of the workshops means that tutor’s feedback (formative) will be received continuously. Solutions/ examples to both workshops and directed learning activity will be made available to test module knowledge which provide formative assessment.

How will I be supported academically on this module?

Support will be provided to you by a member of academic staff leading the module and providing the lecture input. A team of academic staff members will be allocated for IT workshop, which provides a closer, more personal academic support. Your module is supported by an e-learning portal, which houses lecture materials, IT workshops exercises and data files, alongside assessment details and various support facilities such as recorded trading software guides, certain lectures and IT applications, alongside other electronic support facilities. You will be provided with a wide-ranging electronic reading list that comprises of various academic reports, conference papers, video links and journal articles that showcase the theory and application of various techniques presented in the module. Your module assessment consists of construction and management of a portfolio of financial assets mainly equities which will start in week three and finish in your last week of teaching. This will encourage your active participation in the learning process throughout the semester. Trading software functions related to portfolio creation, management and evaluation will be taught alongside.

What will I be expected to read on this module?

All modules at Northumbria include a range of reading materials that students are expected to engage with. The reading list for this module can be found at: http://readinglists.northumbria.ac.uk
(Reading List service online guide for academic staff this containing contact details for the Reading List team – http://library.northumbria.ac.uk/readinglists)

What will I be expected to achieve?

Knowledge & Understanding:
• Critically evaluate theories and techniques and their application to construct, rebalance and evaluate investment portfolio of equities (MLO1).
• Understand and critically assess through discussion and analysis both rational and irrational parts of decision making in investment management of equities (MLO2).

Intellectual / Professional skills & abilities:
• Evidence skills in the handling of stock market data and the corresponding findings of its analysis and modelling for progression to more advanced contexts (MLO3).

Personal Values Attributes (Global / Cultural awareness, Ethics, Curiosity) (PVA):

• To be able to show innovation and critical thinking in applying concepts and theories to various case scenarios and data sets (MLO4).

How will I be assessed?

The module assessment consists of several inter-related tasks which will be distributed throughout your teaching semester.

This will encourage your active participation in the learning process throughout the semester. The eLearning portal will be used to permanently host these tasks after release to ensure that you can access the information required at all times.

Your work on these tasks will provide you with further chance to practice the various areas of asset allocation, portfolio management, rebalancing as well as reflecting on your decision using behavioural finance theory and biases.

Your assessment, representing 100% of the module mark, this will require you to construction, rebalancing and evaluation a portfolio of financial assets. To ensure all learning outcomes are met you are required to submit an individual 3,000 word assignment. This will address MLO1, MLO2, MLO3 and MLO4.

Pre-requisite(s)

None

Co-requisite(s)

None

Module abstract

‘Investment Management: Rational and Irrational Markets’ will enable you to understand and apply theories and techniques of managing investment in financial assets more effectively. Through work in the NBS Trading room and Microsoft Excel you will learn the necessary skills of asset allocation, portfolio diversification, asset pricing while also gaining exposure to behavioural biases in investment decisions. You will evaluate your own behaviours as an investor and develop a range of strategies for moving yourself to a new level of performance. During your time on the module, you will invest in a number of real world financial assets and you will crystallise your reflections and strategies in a report which you will submit as part of your assessment. The module is organised within the themes of rational and irrational decision making in investments (From Nobel Prize winners Eugene Fama and Robert Shiller) in which you would discuss relevant debates in specialised finance journals and everyday finance news.

Course info

UCAS Code N390

Credits 20

Level of Study Undergraduate

Mode of Study 3 years full-time or 4 years with a placement (sandwich)/study abroad

Department Newcastle Business School

Location City Campus, Northumbria University

City Newcastle

Start September 2020

Fee Information

Module Information

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