This course is part of the Investment and Portfolio Management Specialization

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Investment and Portfolio Management Specialization

Rice University

About this Course

17,779

When an investor is faced with a portfolio choice problem, the number of possible assets and the various combinations and proportions in which each can be held can seem overwhelming. In this course, you’ll learn the basic principles underlying optimal portfolio construction, diversification, and risk management. You’ll start by acquiring the tools to characterize an investor’s risk and return trade-off. You will next analyze how a portfolio choice problem can be structured and learn how to solve for and implement the optimal portfolio solution. Finally, you will learn about the main pricing models for equilibrium asset prices.
Learners will:
• Develop risk and return measures for portfolio of assets
• Understand the main insights from modern portfolio theory based on diversification
• Describe and identify efficient portfolios that manage risk effectively
• Solve for portfolio with the best risk-return trade-offs
• Understand how risk preference drive optimal asset allocation decisions
• Describe and use equilibrium asset pricing models.

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Suggested: 5 weeks...

Subtitles: English

Risk ManagementPortfolio ConstructionRisk AnalysisPortfolio Optimization

Start instantly and learn at your own schedule.

Reset deadlines in accordance to your schedule.

Suggested: 5 weeks...

Subtitles: English

Week

1This module introduces the second course in the Investment and Portfolio Management Specialization. In this module, we discuss one of the main principles of investing: the risk-return trade-off, the idea that in competitive security markets, higher expected returns come only at a price – the need to bear greater risk. We develop statistical measures of risk and expected return and review the historical record on risk-return patterns across various asset classes. ...

10 videos (Total 64 min), 11 readings, 4 quizzes

Overview – No free lunches! Risk and return trade-off4m

Measuring returns: Geometric average returns6m

Measuring returns: Arithmetic average returns4m

Measuring risk: Volatility of returns8m

Alternative measures of risk7m

More on measuring risk and risk measures4m

Measuring risk and return: Illustration with four stocks8m

Historical record on risk-return patterns8m

Summary1m

Grading Policy10m

How to use discussion forums10m

Meet & Greet: Get to know your classmates10m

Pre-Course Survey10m

Lecture handouts: Risk and return: Measuring returns10m

Risk and return: Measuring returns Quiz Solutions10m

Lecture handouts: Risk and return: Measuring risk10m

Risk & Return: Measuring risk Quiz solutions10m

Lecture handouts: Risk and return: Historical record10m

Investing: Stocks for the long run (optional)10m

Module 1: Risk & Return Solutions10m

Risk and return: Measuring returns10m

Risk & Return: Measuring risk10m

Module 1: Risk & Return20m

Week

2In this module, we build on the tools from the previous module to develop measure of portfolio risk and return. We define and distinguish between the different sources of risk and discuss the concept of diversification: how and why putting risky assets together in a portfolio eliminates risk that yields a portfolio with less risk than its components. Finally, we review the quantitative tools that help us identify the ‘best’ portfolios with the least risk for a given level of expected return by considering a numerical example using international equity data....

16 videos (Total 83 min), 12 readings, 6 quizzes

Measuring the expected return of a portfolio8m

Let’s review how we measure risk for a single asset4m

Finding the volatility of a portfolio return3m

Portfolio volatility: Another example2m

Measuring the co-movement between securities9m

Putting it all together… portfolio risk and diversification7m

Diversification and portfolio risk3m

Diversification: A graphical illustration with two assets4m

Diversification: A graphical illustration with three assets3m

Diversification: Systematic risk and idiosyncratic risk7m

Diversification: An illustration from international equity markets (US and Japan only)11m

Mean-variance frontier and efficient portfolios: International equity investment example (G5 countries)5m

Are you diversified adequately?4m

Mean-variance portfolio analysis5m

Summary1m

Lecture handouts: Measuring portfolio expected return

Measuring expected portfolio return Quiz solutions10m

Lecture handouts: Measuring portfolio volatility

Measuring portfolio volatility Quiz solutions10m

Accompanying spreadsheets for "Diversification: An illustration from international equity markets (US and Japan only)"10m

A Note on using EXCEL Solver10m

Lecture handouts: Diversification and portfolio risk

Lecture handouts: Mean-variance frontier and efficient portfolios: International equity investment example

Diversification and portfolio risk Quiz solutions10m

Equity investing: Globalization and diversification (optional)10m

Lecture handouts: Are you adequately diversified?

Module 2: Portfolio construction and diversification- Solutions10m

Measuring expected portfolio return16m

Measuring portfolio volatility20m

Diversification and portfolio risk30m

Module 2: Portfolio construction and diversification20m

Week

3In this module, we describe how investors make choices. Specifically, we look at how utility functions are used to express preferences. We review measures to describe investors’ attitude towards risk. Finally, we discuss how we can summarize investors’ preferences using a specific utility function: mean-variance preferences. ...

7 videos (Total 47 min), 7 readings, 3 quizzes

Preferences: Utility functions8m

Risk aversion9m

Expected utility6m

Mean-variance preferences8m

Portfolio choice problem with mean-variance preferences: A graphical illustration with equity and bond data10m

Summary1m

Lecture handouts: Utility and risk aversion

A note on measuring risk aversion and certainty equivalent10m

Utility and Risk aversion Quiz solutions10m

Lecture handouts: Mean-variance preferences

Portfolio choice with mean-variance preferences quiz solutions10m

Measure your own risk tolerance10m

Module 3: Mean-variance preferences- Solutions10m

Utility and risk aversion10m

Portfolio choice with mean-variance preferences16m

Module 3: Mean-variance preferences12m

Week

4In this module, you will learn about mean-variance optimization: how to make optimal capital allocation and portfolio choice decisions when investors have mean-variance preferences. This was one of the ground-breaking ideas in finance. We will formally set up the investor’s portfolio choice problem and learn step-by-step how to solve for the optimal allocation and risky portfolio choice given a set of risky securities. You will also have an opportunity to apply these techniques to a numerical example. This module is slightly more technical than the others. Stick with it… you will not regret it!...

10 videos (Total 63 min), 12 readings, 3 quizzes

Capital allocation line11m

Solving for the optimal capital allocation7m

Optimal capital allocation example: U.S. equities and Treasuries10m

Finding the optimal risky portfolio: Maximizing the Sharpe ratio6m

Main insight: The optimal risky portfolio is independent of preferences2m

Finding the optimal risk portfolio when you have multiple risky securities10m

Investment decision process5m

What’s wrong with mean-variance portfolio analysis?4m

Summary2m

A note on optimal capital allocation10m

Accompanying spreadsheets for "Optimal Capital Allocation Example: US Equities and Treasuries"10m

Lecture handouts: Mean-variance optimization

Mean-variance optimization Quiz solutions10m

Analytical solution to MVE portfolio (two risky assets)10m

A note on finding the mean variance efficient portfolio (Two risky assets)10m

Accompanying spreadsheets for "Finding the optimal risky portfolio: Maximizing the Sharpe ratio"10m

A note on finding the minimum variance frontier with multiple risky assets10m

Accompanying spreadsheet for finding minimum variance frontier with multiple risky assets10m

Lecture handouts: Optimal risky portfolio choice

Lecture handouts

Optimal capital allocation and portfolio choice- Solutions10m

Mean-variance optimization10m

Optimal capital allocation and portfolio choice18m

Week

5In this module, we build on the insights obtained from modern portfolio theory to understand how risk and return are related in equilibrium. We first look at the main workhorse model in finance, the Capital Asset Pricing Model and discuss the expected return-beta relationship. We then turn our attention to multi-factor models, such as the Fama-French three-factor model. ...

9 videos (Total 56 min), 7 readings, 2 quizzes

From optimal portfolio choice to asset pricing models6m

Insight #1 from Capital Asset Pricing Model: Passive investing is efficient8m

Insight #2 from Capital Asset Pricing Model: What determines the market risk premium?5m

Beta and systematic risk7m

Capital Asset Pricing Model: Expected return-beta relationship7m

Multi-factor models7m

Fama-French three-factor model7m

Summary2m

Lecture handouts: Equilibrium asset pricing models: Capital Asset Pricing Model

"The parable of money managers" (optional)10m

"The dying business of stock picking" WSJ (optional)10m

Equilibrium asset pricing models: Capital Asset Pricing Model Quiz solutions10m

Lecture handouts: Equilibrium asset pricing models: Multi-factor models

Module 5 Quiz: Equilibrium asset pricing models- Solutions10m

End-of-Course Survey10m

Equilibrium asset pricing models: Capital Asset Pricing Model24m

Module 5 Quiz: Equilibrium asset pricing models30m

4.6

40 Reviewsstarted a new career after completing these courses

got a tangible career benefit from this course

By AH•Dec 17th 2016

I really enjoyed this course. Sometimes it required a lot of discipline to analyse investigate, but at the end I've learn a lot.

By AA•Nov 11th 2018

This is the most informative in depth short course i ever across. Learned a lot!

Rice University is consistently ranked among the top 20 universities in the U.S. and the top 100 in the world. Rice has highly respected schools of Architecture, Business, Continuing Studies, Engineering, Humanities, Music, Natural Sciences and Social Sciences and is home to the Baker Institute for Public Policy....

In this four-course Specialization, you’ll learn the essential skills of portfolio management and personal investing.
All investors – from the largest wealth funds to the smallest individual investors – share common issues in investing: how to meet their liabilities, how to decide where to invest, and how much risk to take on. In this Specialization, you will learn how to think about, discuss, and formulate solutions to these investment questions. You will learn the theory and the real-world skills necessary to design, execute, and evaluate investment proposals that meet financial objectives. You will begin with an overview of global financial markets and instruments that characterize the investment opportunities available to today’s investor. You will then learn how to construct optimal portfolios that manage risk effectively, and how to capitalize on understanding behavioral biases and irrational behavior in financial markets. You will learn the best practices in portfolio management and performance evaluation as well as current investment strategies. By the end of your Capstone Project, you will have mastered the analytical tools, quantitative skills, and practical knowledge necessary for long-term investment management success.
To see an overview video for this Specialization, click here!...

When will I have access to the lectures and assignments?

Once you enroll for a Certificate, you’ll have access to all videos, quizzes, and programming assignments (if applicable). Peer review assignments can only be submitted and reviewed once your session has begun. If you choose to explore the course without purchasing, you may not be able to access certain assignments.

What will I get if I subscribe to this Specialization?

When you enroll in the course, you get access to all of the courses in the Specialization, and you earn a certificate when you complete the work. Your electronic Certificate will be added to your Accomplishments page - from there, you can print your Certificate or add it to your LinkedIn profile. If you only want to read and view the course content, you can audit the course for free.

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