Course Detail

Advanced Investments (35150)

Course Description by Faculty

  • Nagel, Stefan
  • Content

    This course covers advanced topics in investments from a macro asset allocation perspective. We take the perspective of a long-term investor seeking to dynamically allocate investments across broad asset classes such as global equities, corporate and sovereign bonds, and private equity. Building an asset allocation strategy requires an understanding of the dynamics of risk and return in these asset classes. We will use empirical techniques, including return forecasting regressions, shrinkage estimation, and out-of-sample evaluation methods to shed light on these empirical dynamics. Furthermore, we will see how data from investor surveys and on investor flows can be used to assess the state of investor sentiment. To use the empirical evidence in asset allocation decisions, we will extend the mean-variance portfolio choice framework that you encountered in your introductory investments class to analyze multi-period portfolio policies over long horizons. We will also evaluate practical rule-of-thumb approaches such as risk parity and naive diversification strategies. We will explore in detail the use of leverage, volatility derivatives, and tail-risk hedging; macro risk factors linked to interest rates and monetary policy; inflation risk and inflation-protected bonds; bubbly assets (meme stocks, crypto currencies, gold). We will discuss the special challenges that investors face in integrating private equity investments, and other similarly illiquid assets, in an asset allocation framework.  

  • Prerequisites

    Business 35000 and 41000 (or 41100) are strict prerequisites for this course. Students must be comfortable with statistics, regression analysis, basic microeconomics (expected utility and risk aversion), basic matrix algebra, and fundamental concepts of investments such as mean-variance analysis in portfolio choice, CAPM, bond valuation, option payoffs, and Black-Scholes. 

     

    Restrictions
    • Strict Prerequisite

  • Materials

    There is no required textbook. Detailed lecture notes and slides will be made available on Canvas. Readings and supplementary materials will be made available on Canvas as well. 

     

  • Grades

    Based on several homework problem sets, quizzes, a final exam, and class participation. 

    Restrictions
    • No auditors

  • Syllabus
  • Winter 2023Section: 35150-01W 8:30AM-11:30AMHarper CenterC05In-Person Only
    New Course
  • Winter 2023Section: 35150-81W 6:00PM-9:00PMGleacher Center204In-Person Only
    New Course
Description and/or course criteria last updated: October 31 2022