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Macro Investment Analysis

Опубликовано на портале: 27-06-2006
Год: Spring 1999
Язык: Английский
Тематические разделы: Экономика, Рынок ценных бумаг, Рынок ценных бумаг: Фундаментальный анализ, Рынок ценных бумаг: Управление портфелем ценных бумаг

This course is Macro Investment Analysis. It can be considered a second course on portfolio management. Author take a particular view of the portfolio management process, with emphasis on (1) the decisions that must be made by and/or for the ultimate investor and (2) the analytic tools and empirical evidence that can help inform such decisions.

Finance 368
Macro Investment Analysis

Stanford Graduate School of Business
Professor William F. Sharpe
Spring, 1999

Official Course Description

F368. Macro-Investment Analysis This course focuses on investment decisions made by and/or for individuals, pension funds, endowments, and others and on analytic tools and empirical evidence that can help inform such decisions. It concentrates on situations in which the investment vehicles used by investors are primarily mutual funds, derivative securities, and other combinations of fundamental positions rather than individual securities such as specific stocks and bonds. In this view, investing is a multi-level process, with the investor often assisted by an analyst at the top level, a set of investment firms at a second level, and the securities of corporations and government agencies at yet lower levels. Subjects covered include: relationships between risk and return, implications of market efficiency, aspects of observed investor performance, dynamic allocation strategies, Monte Carlo simulation of investment results, and retirement planning.


Finance 328 (Portfolio Management) or permission of the instructor. To obtain the latter, you will need to have a knowledge equivalent to that in a standard investments textbook at or above the level of Fundamentals of Investments by Alexander, Bailey and Sharpe.


Several of the sessions will utilize Worksheets prepared by the instructor. These may also prove helpful as aids to learning the material for the course. References to specific worksheets will be found in this course outline and in some of the reading material.

Supplemental reading

The following books are recommended for those wishing to obtain foundation material, additional discussions, and/or another view on some of the subjects covered in the course.

  • Edwin J. Elton and Martin J. Gruber, Modern Portfolio Theory and Investment Analysis, Fifth Edition. New York: John Wiley & Sons, Inc., 1995
  • Richard C. Grinold and Ronald N. Kahn, Active Portfolio Management, Probus Publishing, Chicago, Ill., 1995
  • Mark Kritzman, The Portable Financial Analyst - What Practitioners Need to Know,. Chicago: Probus Publishing, 1995
  • William F. Sharpe, Gordon J. Alexander and Jeffery V. Bailey, Investments, Fifth Edition. Englewood Cliffs, N.J.: Prentice-Hall, 1995

Course Material

At present, no printed textbook adequately covers the domain of this course. Instead, we will rely on the reading material described below. Material that is highlighted is only a click away via the web. The remainder of the material is included in the syllabus available to students registered for the course.

All the web material can be accessed from the instructor's site.

The instructor's goal is eventually to provide all the material for this course on the web in a reasonably consistent and coherent form. Meanwhile, some of the subjects must be covered with material written in other forms for different audiences. To minimize confusion (the students' and also the instructor's), the latter's own publications were given a high priority in the selection process. Be assured that no royalties are involved.

In the list below, highlighted readings are on the web and can be obtained directly. The remainder must be obtained on paper.

The material listed for each session should be read before the date given. Those who have not read the material in advance may be confused, embarrassed and/or frustrated.

Course Material


1. Introduction

Required Reading (before class)


  • Beyond Wall Street, The Art of Investing: Episode 4: Indexing


2. Matrix Algebra

Required Reading (before class)



Required Reading (before class)


4. Prices - I

Required Reading (before class)


5. Prices - 2

Required Reading (before class)


6. Probabilities

Required Reading (before class)


7. Risk and Return /h3>

Required Reading (before class)


8. Optimization

Required Reading (before class)


9. Factor Models

Required Reading (before class)

  • Factor models
  • W.F. Sharpe, "Some Factors in New York Stock Exchange Security Returns, 1931- 1979," Journal of Portfolio Management, Summer 1982, pp. 5-19.
  • R.A. Grinold and D. Stefek, "Global Factors: Fact or Fiction?," Journal of Portfolio Management, Fall 1989, pp. 79-88.


10. Midterm Examination


11. Style Analysis

Required Reading (before class)


12. Equilibrium

Required Reading (before class)

  • Equilibrium - preliminary
  • W.F. Sharpe, "Capital Asset Prices with and without Negative Holdings," Journal of Finance, June 1991, pp. 489-509.
  • W.F. Sharpe, "Factor models, CAPMs, and the APT," Journal of Portfolio Management, Fall 1984, pp. 21-25.
  • Revisiting the Capital Asset Pricing Model
  • S. Benartzi and R.H. Thaler, "Myopic Loss Aversion and the Equity Premium Puzzle"Quarterly Journal of Economics, February 1995, pp. 73-92.


13. Performance Analysis (Monday May 10)

Required Reading (before class)


14. International Investment

Required Reading (before class)

  • A.F. Perold and E.C. Schulman, "The Free Lunch in Currency Hedging: Implications for Investment Policy and Performance Standards," Financial Analysts Journal, May/June 1988, pp. 45-52.
  • W.F. Sharpe, "Hedging Currency Risk in an International Portfolio," Investment Technology, Spring 1992, pp. 1-43.
  • Patrick Odier and Bruno Solnik, "Lessons for International Asset Allocation," Financial Analysts Journal, March/April 1993, pp. 63-77.
  • Carlo Capaul, Ian Rowley and W.F. Sharpe, "International Value and Growth Stock Returns," Financial Analyst's Journal, January/February 1993, pp. 27-36.


15. Investment Policies for Defined Benefit Pension Plans

Required Reading (before class)

  • Martin Leibowitz, "Liability Returns: A New Look at Asset Allocation," Journal of Portfolio Management, Winter 1987, pp. 11-18.
  • William F. Sharpe and Lawrence G. Tint, "Liabilities -- A New Approach," , Journal of Portfolio Management, Winter 1990, pp. 5-10.


16. Dynamic Strategies 1

Required Reading (before class)

  • W.F. Sharpe, "Integrated Asset Allocation," Financial Analysts Journal, September/October 1987, pp. 25-32.
  • Andre Perold and W.F. Sharpe, "Dynamic Strategies for Asset Allocation", Financial Analysts Journal, January/February 1988, pp. 16-27.


17. Dynamic Strategies 2

Required Reading (before class)

  • W.F. Sharpe, "Investor Wealth Measures and Expected Return," Quantifying the Market Risk Premium Phenomenon for Investment Decision Making, The Institute of Chartered Financial Analysts, 1990, pp. 29-37.


18. Individual Retirement Savings and Investment, 1

Required Reading (before class)


19. Individual Retirement Savings and Investment, 2

Required Reading (before class)