In this course, we will discuss fundamental principles of trading off risk and return, portfolio optimization, and security pricing. We will study and use risk-return models such as the Capital Asset Pricing Model (CAPM) and multi-factor models to evaluate the performance of various securities and portfolios. Specifically, we will learn how to interpret and estimate regressions that provide us with both a benchmark to use for a security given its risk (determined by its beta), as well as a risk-adjusted measure of the security’s performance (measured by its alpha). Building upon this framework, market efficiency and its implications for patterns in stock returns and the asset-management industry will be discussed. Finally, the course will conclude by connecting investment finance with corporate finance by examining firm valuation techniques such as the use of market multiples and discounted cash flow analysis. The course emphasizes real-world examples and applications in Excel throughout. This course is the first of two on Investments that I am offering online (“Investments II: Lessons and Applications for Investors” is the second course).
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Investments I: Fundamentals of Performance Evaluation
This course is part of Financial Management Specialization
Instructor: Gies College of Business, University of Illinois
52,220 already enrolled
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(895 reviews)
What you'll learn
Explain the tradeoffs between risk and return.
Form a portfolio of securities and calculate the expected return and standard deviation of that portfolio.
Describe what is meant by market efficiency and what it implies for patterns in stock returns and for the asset-management industry.
Conduct specific examples of a market multiples valuation.
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There are 6 modules in this course
In this module, you will become familiar with the course, your instructor, your classmates, and our learning environment. The orientation also helps you obtain the technical skills required for the course.
What's included
3 videos10 readings1 quiz
In Module 1, we will build the fundamentals of portfolio formation. After providing a brief refresher of basic investment concepts (our toolkit), a summary of historical patterns of stock returns and government securities in the U.S. is provided. We then consider general examples of portfolio choice to highlight the tradeoffs between “risk” and return. We end the module with a discussion of dominated assets and efficient portfolio formation, emphasizing real-world examples and practice in Excel solving for the optimal portfolio given certain constraints (such as the amount of volatility we will accept in our portfolio).
What's included
24 videos3 readings1 quiz
In Module 2, we will develop the financial intuition that led to the Capital Asset Pricing Model (CAPM), starting with the Separation Theorem of Investments. We will understand that in a CAPM setting, only the market-wide risk of an asset is priced – securities with greater sensitivity to the market are required by investors to yield higher returns on average. We will also learn how to interpret regressions that provide us with both a benchmark to use for a security given its risk (determined by its beta), as well as a risk-adjusted measure of the security’s performance (measured by its alpha).
What's included
21 videos3 readings1 quiz1 peer review
In Module 3, we will discuss different asset-pricing models, the pros and cons of each, and market efficiency. In particular, we will test the effectiveness of the Capital Asset Pricing Model (CAPM) and examine survey data concerning its use by chief financial officers (CFOs) of firms. Predictable patterns in stock returns, such as the size and value effects, will also be examined and the Fama-French 3-Factor Model will be introduced. Market efficiency will be discussed in this module, as well as its implications for the asset-management industry and observed patterns in stock returns.
What's included
18 videos3 readings1 quiz1 peer review
In Module 4, we will learn about the two key approaches to valuing a company or stock: market multiples and discounted cash flow. We will learn how to value perpetuities and will discuss how caution should be exercised in terms of projecting both the growth in long-term cash flows and the riskiness of those cash flows – two key components of the perpetuity formula. Finally, to gain experience with the market multiples approach, we will estimate a value of Google at the time of its initial public offering (IPO) back in 2004 using market data on Yahoo! as a comparable firm.
What's included
27 videos2 readings1 quiz
In this module, we say goodbye to the Investments course as key takeaways from the course are reviewed. A tease is also provided to topics that will be covered in Professor Weisbenner's second course on Investments.
What's included
1 video2 readings
Instructor
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Recommended if you're interested in Finance
Interactive Brokers
University of Illinois Urbana-Champaign
Emory University
Build toward a degree
This course is part of the following degree program(s) offered by University of Illinois Urbana-Champaign. If you are admitted and enroll, your completed coursework may count toward your degree learning and your progress can transfer with you.¹
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Reviewed on Dec 18, 2018
Amazing! Shed light on so many questions that I didn't even know to ask and corrected a lot of assumptions I had wrong. Loved this class. A must take class.
Reviewed on Nov 12, 2020
Excellent course. Lot of ground covered by Scott and his detailed explanations make some tougher topics give look more easier. His sense of humor and delivery is really nice
Reviewed on Aug 29, 2017
Great course and professor. Packs a lot of information and did not find any mistakes. Very smooth course overall. Highly recommended.
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