University of Chicago. Course Outline (provisional) FINANCE PP 320. Spring 2015 Mondays 3 to 5:30 PM Location:??, 1155 E 60th Street

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1 University of Chicago Course Outline (provisional) FINANCE PP 320 Spring 2015 Mondays 3 to 5:30 PM Location:??, 1155 E 60th Street Raaj Sah sah@uchicago.edu Room 177, 1155 E 60th Street Mobile: Teaching Assistant: Yuan Mei meiy@uchicago.edu Mobile: Revised: January 10, 2015

2 OVERVIEW Increasingly, many public policy positions require expertise in finance. This expertise includes the ability to analyze investments and projects, to participate in borrowing operations and portfolio management, and to deal with various financial instruments, markets and institutions. Even those professionals whose entry-level jobs do not involve financial matters often find that their long-term career opportunities are enhanced by their competence in finance. Finance can be learned at several different levels. This course is somewhat more comprehensive than typical entry-level finance courses in MBA programs. A longterm learning goal of this course is to acquire financial intuition. Accordingly, intuition is emphasized in every part of the course. Throughout the course, you are expected to become routinely and vigorously involved in class participation. The ideas and methods taught in this course are valuable regardless of whether you are employed in the public sector, the private sector, or the non-profit sector. Given the limited availability of time, this course focuses primarily on the foundations of finance, and not on many other things that are taught in finance-related course, including applications, cases, and practice-oriented project work. TOPICS Additional topics and materials might be added, and some omitted, depending on the availability of time. I have requested the Regenstein Library to place on reserve the books noted below. For our purposes, there is no substantive difference among the various editions of the textbooks cited below. Several of the readings (including those that are marked with *) are optional. I will discuss these in the class and will summarize their contents. 1. Assets, securities, indices, and financial markets. Bodie, Zvi, Alex Kane and Alan J. Marcus, Investments, 10th edition, McGraw Hill/Irwin, New York, Chapters 2, 3 and 4. Class notes 1. University of Chicago. PP320. Page 2

3 Houthakker, Hendrik S. and Peter J. Williamson, The Economics of Financial Markets, Oxford University Press, New York, Chapter 3.* Teweles, Richard J., Edward S. Bradley and Ted M. Teweles, The Stock Market, 7th edition, Wiley, New York, * Tirole, Jean, The Theory of Corporate Finance, Princeton University Press, 2006 Princeton, pages * 2. Some patterns of world-wide risks and returns. Bernstein, Peter L., Against the Gods: The Remarkable Story of Risk, Wiley, New York, * Brealey, Richard A., Stewart C. Myers and Franklin Allen, Principles of Corporate Finance, 11th edition, McGraw Hill/Irwin, New York, Chapter 7, Part 1. Class notes 2. Malkiel, Burton G., A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, 10th edition, W. W. Norton, New York, * Siegel, Jeremy J., Stocks for the Long Run, 5th edition, McGraw Hill, New York, * 3. Descriptions of risk. Choices in risky situations. Anomalies of behavior. Bodie, Kane and Marcus. Chapter 6. Class notes 3. Hirshleifer, Jack and John G. Riley, The Analytics of Uncertainty and Information, Cambridge University Press, New York, Chapter 1.* 4. Comparisons of future cash flows without and with uncertainty. Brealey and Myers. Chapters 5, 6, and 10. University of Chicago. PP320. Page 3

4 Class notes 4. Copeland, Thomas E. and J. Fred Weston, Financial Theory and Corporate Policy, 4th edition, Addison-Wesley, Reading, MA, Chapters 2 and 3.* 5. Analysis of portfolios. Choices of optimal portfolios. Bodie, Kane and Marcus. Chapters 7 and 8. Class notes 5. Copeland and Weston, Chapter 6.* 6. Derivative securities. Futures, options, and other contracts. Bodie, Kane and Marcus. Chapters 20, 21 and 22. Class notes 6. Hull, John C., Options, Futures, and Other Derivatives, 8th edition, Prentice-Hall, Englewood Cliffs, NJ, Chapters 5, 10, and 14.* 7. Valuation of securities. Bodie, Kane and Marcus. Chapters 9, 10 and 11. Copeland and Weston. Chapter 7.* Varian, Hal. Microeconomic Analysis. 3rd edition, Norton, Chapter 20.* GRADING Grades will be based on individual class participation (25%), a mid-quarter test (37%), and a final test (38%). The mid-quarter test will be held in the class in the 6th session of the course. The final test will be held in the class in the last session of the course. University of Chicago. PP320. Page 4

5 There will be no make-up or early tests. We may need to reschedule the date of one or two sessions. Typed answers will be made available at the end of each test. I will distribute two takehome problem sets. Additional problem sets are available upon request. PREREQUISITES PP 323, or the instructor s consent. Laptops or similar devices cannot be used in the class without explicit permission. University of Chicago. PP320. Page 5