ICM401: Investments

Module code: ICM401

Module provider: ICMA Centre; Henley Business School

Credits: 20

Level: Postgraduate Masters

When you'll be taught: Semester 1

Module convenor: Dr Nadia Kappou, email: k.kappou@icmacentre.ac.uk

Pre-requisite module(s): This module builds on the content covered in the pre-sessional module 'Building Blocks of Finance' and students are expected to have completed this pre-sessional module prior to the start of ICM401 (Open)

Co-requisite module(s):

Pre-requisite or Co-requisite module(s):

Module(s) excluded:

Placement information: NA

Academic year: 2024/5

Available to visiting students: No

Talis reading list: Yes

Last updated: 28 May 2024

Overview

Module aims and purpose

The module aims to equip students with the main principles of Investment Theory. It begins with an overview of the interaction between users and suppliers of capital and the theory behind investor behaviour towards financial risk and reward. It then analyses the main framework of portfolio theory and optimum asset allocation, and how portfolio diversification can help minimise investment risk. Through the introduction of the main pricing models (single-factor and multi-factor) and the fundamental concept of arbitrage-free pricing, students are exposed to techniques for valuing and comparing different risky assets. The theory of Market Efficiency and its violation completes students’ perception of how financial market equilibrium is reached in modern economies. Furthermore, the module provides an in-depth introduction to financial derivatives (futures and options) and their key role in leveraging and hedging investments. All the techniques introduced are widely applied in other elements of the programme. 

Module learning outcomes

By the end of the module, it is expected that students will be able to: 

• Assess the characteristics of individual assets and portfolios of risky assets; Construct the mean-variance efficient frontier for a given universe of risk assets, identify optimum risky portfolios and suggest optimum asset allocation.   
• Explain the role of beta as a risk measure in the capital market equilibrium described by the CAPM and the use of the no-arbitrage principle to the pricing of risky assets.  
• Explain the fundamentals of forward and futures contracts, their valuation and use in simple hedging strategies; outline financial options, their characteristics and valuation. 
• Apply their knowledge of real-world pricing and trading strategies (INVEST sessions). 

Module content

Topic 1 Investing in financial markets: suppliers vs. users of capital; principles of corporate finance  

Topic 2 Investor behaviour and choice under uncertainty 

Topic 3 Portfolio theory and applications 

Topic 4 The Capital Asset Pricing Model 

Topic 5 Multifactor Models and the Arbitrage Pricing Theory 

Topic 6 Efficient Markets; theory and violations 

Topic 7 Forwards and Futures 

Topic 8 Introduction to Options 

Topic 9 Options’ basic properties and valuation 

Topic 10 Masterclass: Ethical and Professional Standards and ESG Investing 

Structure

Teaching and learning methods

1. Lectures: Weekly two-hour lectures cover the topics 
2. Seminars: students meet in small groups for a series of one-hour seminars, solving problem sets that directly relate to the content taught in the Lectures. Seminar discussions are based on non-assessed coursework set by the instructors. The students will develop familiarity with sources of financial market data and gain experience in analysing this data in ways closely related to market practice. The seminars will provide students with an opportunity to propose and defend explanations for the observed behaviour of investors and the resulting pattern of returns on risky assets. 
3. INVEST Dealing Room Sessions with Grade Point Cash counting towards the final grade. Students are exposed to trading financial assets through simulations. 

Study hours

At least 39 hours of scheduled teaching and learning activities will be delivered in person, with the remaining hours for scheduled and self-scheduled teaching and learning activities delivered either in person or online. You will receive further details about how these hours will be delivered before the start of the module.

Please note the independent study hours above are notional numbers of hours; each student will approach studying in different ways. We would advise you to reflect on your learning and the number of hours you are allocating to these tasks.

Semester 1 The hours in this column may include hours during the Christmas holiday period.

Semester 2 The hours in this column may include hours during the Easter holiday period.

Summer The hours in this column will take place during the summer holidays and may be at the start and/or end of the module.

Assessment

Requirements for a pass

50% weighted average mark 

Summative assessment

Penalties for late submission of summative assessment

The Support Centres will apply the following penalties for work submitted late:

Assessments with numerical marks

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of three working days;
• the mark awarded due to the imposition of the penalty shall not fall below the threshold pass mark, namely 40% in the case of modules at Levels 4-6 (i.e. undergraduate modules for Parts 1-3) and 50% in the case of Level 7 modules offered as part of an Integrated Masters or taught postgraduate degree programme;
• where the piece of work is awarded a mark below the threshold pass mark prior to any penalty being imposed, and is submitted up to three working days after the original deadline (or any formally agreed extension to the deadline), no penalty shall be imposed;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

Assessments marked Pass/Fail

• where the piece of work is submitted within three working days of the deadline (or any formally agreed extension of the deadline): no penalty will be applied;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension of the deadline): a grade of Fail will be awarded.

The University policy statement on penalties for late submission can be found at: https://www.reading.ac.uk/cqsd/-/media/project/functions/cqsd/documents/qap/penaltiesforlatesubmission.pdf

You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Formative assessment

Formative assessment is any task or activity which creates feedback (or feedforward) for you about your learning, but which does not contribute towards your overall module mark.

Weekly problem sets (covered during the seminars) with written feedback to all questions provided at the end of each week. 

Reassessment

Additional costs