University of Chittagong
Department of Finance
Course Title: Investment Analysis
Course Code: FIN 405
Marks: 100
Credit: 3.00 Hours
Course Objectives:
This course is designed to provide students an overview of investment framework. It covers areas
like fundamental issues needed prior to investment decision; selection of an investment alternative;
analysis of market, industry and company; organization of securities market; and pricing of
investment. After completion of this course, students are expected to be able to:
a) Have an overview of the environment that surrounds the whole investment horizon;
b) Know about the fundamental issues needed for selecting investment in real and financial
assets;
c) Identify an appropriate investment alternative;
d) Know about the pricing of different investment alternatives including financial assets
traded in the securities market;
e) Get acquainted with the idea of investing indirectly through different investment
companies.
Course Contents:
1. The Investment Setting: Definition of Investment; Why do people Invest? Nature of Investment
- Real and Financial Asset, Marketable and Non Marketable Securities; Importance of Studying
Investment; Investment Decision Process; Forms of Investment Strategies; Why should we learn
Modern Investment Theories? Holding Period Return; Holding Period Yield; Mean Historical
Return for Single and Portfolio of Investments; Expected Rate of Return, Risk of Expected Rate
of Return; Risk Measure for Historical Return; Determinants of the Required Rate of Return of
Investment - Real Risk Free Rate (RRFR), Nominal Risk Free Rate (NRFR) and Factors affecting
NRFR, Risk Premium, Risk Premium and Portfolio Theory, Fundamental and Systematic Risk;
Relationship between Risk and Return.
2. The Asset Allocation Decision: Concept, Individual Investor’s Life Cycle, Portfolio Management
Process, Need for a Policy Statement, Input to the Policy Statement– Investment Objectives and
Investment Constraints, Importance of Asset Allocation.
3. Securities Markets and Stock Market Indexes: What is a Market? Characteristics of Good
Market, Primary Capital Markets, Secondary Financial Markets, Over–The–Counter Market,
Third Market, Call versus Continuous Markets; Investment Banking; Process of Security
Underwriting; Broker versus Dealer; Types of Orders; Short Sales; Margin Transactions; Security
Market Indicator Series – Uses of Market Index, Differentiating Factors in constructing Market
Indexes; Different Stock Market Indexes.
4. Fundamental Analysis:
Economy Analysis: The Economy and the Stock Market - The Business Cycle, The Relationship
between the Bond Market and the Stock Market, Macroeconomic Factors of the Economy;
Understanding the Stock Market - The Determinants of Stock prices; Valuing the Market;
Forecasting Changes in the Market.
Industry Analysis and Company Analysis: Industry Analysis - Performance of Industries over
time, Concept of Industry and Its Classification, Analyzing Industries, The Industry Life Cycle,
Qualitative Aspects of Industry Analysis, Evaluating Future Industry Prospects; Company
Analysis – Fundamental Analysis, Accounting Aspects of Earnings, The Problems with Reported
Earnings, Analyzing a Company’s Profitability, Fundamental Security Analysis in Practice.
5. Technical Analysis: Meaning, Basic Principles, Trend and Trend Reversals, Mathematical
Indicators and Market Indicators.
6. Valuation Principles and Practices: An Overview of the Valuation Process; Why a Three-Step
Valuation Process? Does the Three-Step Process work? Theory of Valuation – Stream of Expected
Returns, Required Rate of Return, Investment Decision Process; Valuation of Bonds; Valuation of
Preferred Stock; Approaches to the Valuation of Common Stock.
7. Investments in Real Assets: Advantages and Disadvantages of Real Assets; Real Estate as an
Investment; Financing of Real Estate; Types of Mortgages – Fixed, Variable, and Adjustable Rate
Mortgages; Forms of Real Estate Ownership; Real Estate Financing Companies in Bangladesh.
8. Investment Companies: Concept; Types- Open-End, Closed-End, and Unit Trust; Types of Mutual
Funds; Investment Company Performance; Different Investment Companies Operating in
Bangladesh.
Text Books:
1. Investment Analysis and Portfolio Management – Frank K. Reilly and Keith C. Brown.
2. Investments: Analysis and Management – Charles P. Jones.
Reference Books:
1. Portfolio and Investment Selection: Theory and Practice – Haim Levy and Marshall Sarnat.
2. Fundamentals of Investment Management – Hirt Geoffrey and Block B. Stanley.