Investments: Equity Portfolios and Pricing

Semester Autumn
Level 11
Credit Value 10
Module Co-ordinator Professor David McMillan
Contact Hours

The module will be delivered by means of (2hr) weekly lectures and smaller group seminars (for problem solving and group presentations).  10 hours lectures/10 hours tutorials to be delivered over 6 weeks of teaching.

Assessment Assessment will comprise of a one hour multiple choice test (50 per cent of the module grade) and a group project based around a trading simulator (50 per cent of the module grade). The multiple choice test will contain both numerical and discursive questions and will enable students to demonstrate their knowledge of the module material. The group project is designed to allow students to demonstrate their knowledge of portfolio building techniques, understanding the factors that cause asset prices to change and how to evaluate portfolio performance.


The module aims to provide an understanding of equity investments and portfolio management.  The module will begin with an overview of the portfolio choice between equities and bonds. The module then examines several portfolio building and equilibrium asset pricing models (e.g., CAPM and the Fama-French models). Subsequently, the module will examine issues in stock return predictability, covering a range of alternative asset pricing models as well as considerations of behavioural finance. These issues are ten extended to a wider international context and the costs and benefits of forming internationally diversified portfolios. These principles are then applied to issues of performance measurement within portfolio management. Upon completion of the module students will have met learning outcomes from levels I, II and III of the CFA® Program Candidate Body of Knowledge in respect of Equity Investments and Portfolio Management.

Learning Outcomes

By the end of the module students should be able to:

  • Explain and apply concepts and implications of the assumption of risk aversion and utility theory to investment theory.
  • Explain and apply alternative risk measures, e.g., probability of loss and semi-variance.
  • Explain and calculate expected return, variance (standard deviation), covariance and correlation coefficient both for individual stocks and for portfolios of stocks.
  • Describe the Capital Asset Pricing Model and understand its implications for market behaviour and asset pricing. 
  • Explain the three different ways of building factor models, including equilibrium models (e.g., Fama-French, APT) and alpha-seeking models.
  • Explain the different types of market efficiency.
  • Explain the strengths and weaknesses of behavioural finance as well as it most important characteristics.
  • Explain the evidence on stock return predictability and its implications for asset pricing and market efficiency.
  • Describe the basic principles underlying an examination of portfolio performance.
  • Appreciate the value of market timing and how it may be measured. 
  • Explain the advantages and disadvantages of both active and passive portfolio management.
  • Understand the merits and disadvantages of international diversification.


 Generic skills 

  • methodical working through planning and prioritisation 
  • oral presentation skills in seminar presentations
  • team working skills in group work for seminar assignments
  • effective time management and the ability to work under pressure

Cognitive skills

  • Numerical skills, through the manipulation and interpretation of financial data, and application of financial pricing concepts
  • Analytical skills, through the analysis of information in order to solve structured problems
  • The ability to identify arguments and think critically

Division: Accounting & Finance



This module information is representative of what is included in the module in a given year. Details of actual reading, lectures and coursework may vary year to year and will be available at the beginning of the semester.

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