NOTE: This is for information only. Many of the links shown here are no longer accurate
The title of this course is Macro Investment Analysis. It can be considered an expanded course on portfolio management. However, we 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.
In previous years, much of the material in this course was taught under the title Portfolio Management as Finance 328. Starting in 1998 the more traditional content of a portfolio management course is being taught as Finance 328, with the non-traditional material included in Finance 368. Since 1998 is a transition year, there will be considerable overlap between the two courses.
In this year, F328 is not a prerequisite for F368. Students who took F328 in Spring 1997 should not take F368 this year. Students who took F328 in Winter 1998 are welcome to take F368 this year but warned that there will be considerable repetition of material.
It is intended that in the academic year 1998-1999, F368 will be restructured to be a genuine follow-on to F328. At that time, successful completion of F328 or the attainment of equivalent knowledge will become a prerequisite to enrollment in F368.
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.
There will be a midterm and a final. The final will receive 150% of the weight assigned the midterm.
Midterm:
Final:
Attendance will be taken at every session in which there is a guest speaker. Any unexcused absence in one of these sessions will result in a lower grade for the course. To apply for an excused absence, email the instructor at least 48 hours prior to the class in question.
Grades will be based on examination scores with the possibility of adjustment by the instructor based on discussions in class. In the event of unexcused absences from a session in which there is a guest speakers the grade will be decremented.
Informal office hours will be held in the classroom (GSB 83) after class, from 11:30 until 12:00 (as needed). Appointments for longer consultations in the instructor's office (Littlefield 381) can also be made at that time.
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.
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 either of the instructor's sites:
http://www-sharpe.stanford.edu
http://www-leland.stanford.edu/~wfsharpe
The instructor's goal is 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.
Required Reading (before class)
- Investment Approaches
- Financial Economics
- Models and Paradigms
- W.F. Sharpe, "The Parable of the Money Managers," Financial Analysts Journal, July/August 1976, p. 4.
- W.F. Sharpe, "The Arithmetic of Active Management," Financial Analysts Journal, January/February 1991, pp. 7-9.
Video
- Beyond Wall Street, The Art of Investing: Episode 4: Indexing
Required Reading (before class)
Required Reading (before class)
Required Reading (before class)
- Mean, Variance and Distributions
- Portfolio Choice
- Multi-period Returns
- Portfolio Characteristics
- Two-asset Portfolios
Video
- Beyond Wall Street, The Art of Investing: Episode 8: Managing Investment Risk
Required Reading (before class)
Required Reading (before class)
- Factor models -- copies of overheads
- W.F. Sharpe, "Some Factors in New York Stock Exchange Security Returns, 1931- 1979," Journal of Portfolio Management, Summer 1982, pp. 5-19.
- W.F. Sharpe, "Asset allocation: Management style and performance measurement," Journal of Portfolio Management, Winter 1992, pp. 7-19.
- Setting the Record Straight on Style Analysis
- R.A. Grinold and D. Stefek, "Global Factors: Fact or Fiction?," Journal of Portfolio Management, Fall 1989, pp. 79-88.
- Morningstar's Risk-adjusted Ratings
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.
- S. Benartzi and R.H. Thaler, "Myopic Loss Aversion and the Equity Premium Puzzle"Quarterly Journal of Economics, February 1995, pp. 73-92.
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.
Video
- Beyond Wall Street, The Art of Investing: Episode 3: Quantitative Investing
Speakers
- Anne Casscells is the Managing Director of Investment Policy Research at Stanford Management Company. SMC is the investment arm of Stanford University, overseeing over $4 billion in endowment and other assets. Her responsibilities include asset allocation, spending policy, foreign exchange, tactical asset allocation, inflation hedging, arbitrage and distressed securities. Prior to joining Stanford she was a Vice President in the fixed income division of Goldman Sachs where she worked from 1985 to 1995. She holds an MBA from the Graduate School of Business at Stanford University and a BA from Yale University .
- Laurie Hoagland was appointed President and CEO of Stanford Management Company, Stanford University's $5 billion investment and real estate organization, in July 1991. For the previous 11 years, Mr. Hoagland had been a co-founder and partner in the investment management firm of Anderson, Hoagland and Company in St. Louis. He has also held positions as Vice President and Treasurer of Cummins Engine Company, Vice President and Portfolio Manager of the Irwin Management Company in Columbus, Indiana. Laurie was a director and a member of the Investment Committee of the Board of Pensions of the Presbyterian Church from 1981 to 1992 and currently serves on the Board of the Louisville Presbyterian Theological Seminary. He is a member of the Finance Committee of the Rockefeller Foundation and the Investment Committee of the Hewlett Foundation. Mr. Hoagland graduated from Stanford University with an AB in Economics in 1958, as a Marshall scholar received a BA in Philosophy, Politics and Economics from Oxford University in 1960,and earned an MBA from Harvard in 1962.
Required Reading (before class)
- Harvard Management Company 1994
- The Yale Endowment 1996
- Extracts from the Stanford University Annual Financial Report 1996
Luncheon:
- Scott Utzinger
- Ali Abbas
Speaker
- Tom Mead
Required Reading (before class)
Luncheon
- Ignacio Bustamente
- Tatiana Fernandez
- Alexandre Alfonsi
Required Reading (before class)
- Mutual Fund Performance Measurement
- W.F. Sharpe, "The Sharpe Ratio," Journal of Portfolio Management, Fall 1994, pp. 49-58.
- Morningstar's Risk-adjusted Ratings
- Financial Economists' Roundtable Statement on Risk Disclosure by Mutual Funds
Video
- Beyond Wall Street, The Art of Investing: Episode 7: Global Asset Allocation
Speaker
- Gary Brinson is the President and Chief Investment Officer of Brinson Partners, Inc. and Chief Investment Officer of the United Bank of Switzerland. He received is B.A. defree from Seattle University and his M.B.A. degree from Washington State University. He is a trustee of the College Retirement Equities Fund and a trustee of the Institute of Chartered Financial Analysts.
Luncheon
- Stephan Morgan
- Jeff M.
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.
- 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.
Speaker
- Charlie Jacklin is Chief Investment Strategist for Mellon Capital Management Corporation. He is responsible for investment strategy and research as well as business development. Previously, as Director of Asset Allocation Strategies he was responsible for portfolio management in domestic, international and global asset allocation strategies. He also engages in investment research, is the Chairman of the Investment Research Committee, and is a member of the Investment Management Committee. Prior to joining Mellon Capital, Charlie was on the finance faculty of Stanford University's Graduate School of Business. At Stanford, he taught a variety of finance courses in the M.B.A., Sloan, and Ph.D. programs and did extensive research in finance and investments. In addition, he has been an instructor for the Stanford - London Business School International Investment Management Program, the Stanford Financial Management Program, and the Pacific Coast Banking School. For the academic year 1990 - 91, Charlie served as Senior Staff Economist for Financial Markets and Banking for the President's Council of Economic Advisers in Washington, D.C. Prior to joining Stanford in 1987, Charlie spent three years on the finance faculty at the University of Chicago's Graduate School of Business. From 1978 to 1980, as a management consultant with Ernst & Ernst, he provided financial planning and risk management consulting services to a variety of clients, primarily from the financial services industry. Charlie received his Ph.D. in Finance from Stanford University in 1985, an M.B.A. from the University of Illinois in 1978, and a B.S. in Mathematics, cum laude, from the University of Maryland in 1976. Charlie has published a number of papers on finance and investments in academic research journals, including the Review of Financial Studies, the Journal of Political Economy, and the Journal of Monetary Economics.
Required Reading (before class)
- Thomas B. Hazuka and Randal G. Pearson, "A Valuation Approach to Currency Hedging," Financial Analysts Journal, March/April 1994, pp. 55-59.
Luncheon
- Lee Phon
- John Linehan
- Steven Fox
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.
Speakers
- Bob L. Boldt is the Senior Investment Officer, Global Public Market Investments, of the California Public Employees' Retirement System (CalPERS). He is responsible for the management of more than $100 billion of CalPERS assets invested in equity and debt markets around the world. Mr. Boldt has more than 20 years of investment management experience. Prior to joining CalPERS, Mr. Boldt held senior management positions at the Northern Trust Company, the American National Bank of Chicago, Concord Capital Management, and Scudder, Stevens & Clark. He has written extensively on investment topics and is a former recipient of the Graham and Dodd Award from the Financial Analysts Federation. Mr. Boldt earned an undergraduate degree in engineering and an MBA from the University of Texas at Austin. He is a Chartered Financial Analyst. CalPERS is the nation's largest public pension fund and the third largest in the world. The System provides retirement and health benefits to more than one million employees and their families.
- Patricia Pinkos is a Principal Investment Officer, Internal Equities, for the California Public Employees' Retirement System (CalPERS). Her responsibilities include management of the $40 billion domestic equity index fund and special projects related to asset allocation formulation and implementation. She formerly managed the Manager Relations unit for CalPERS, which oversees external managers in the area of active domestic equity, international equity and fixed income and currency overlay. Prior to joining CalPERS in 1987, she had her own business advising individuals and small pension funds on financial planning issues. She holds an MBA from Golden Gate University and a BA from the University of Michigan in mathematics. She is a Chartered Financial Analyst.
Required Reading (before class)
Luncheon
- Jian Wang
- Ramez Tombassy
- Art Richardson
Required Reading (before class)
- Financial Planning in Fantasyland
- Nobel Laureate Discusses Basic Investing Decisions
- The Economic Report of the President, 1997: Social Security
- Hemant Shah, "Toward Better Regulation of Private Pension Funds" The World Bank Policy Research Working Paper #1791, June 1997
- Financial Economists Roundtable Statement on Social Security
Speaker
- Elizabeth Obershaw is Director, Benefit Fund Investments at Hewlett-Packard, with investment management responsibility for HP’s U.S. retirement and employee welfare plans, which currently represent over $3 billion in assets. In this capacity, Ms. Obershaw and her staff are responsible for determining asset allocation policies, selecting investment managers, and managing a $500 million in-house equity portfolio. The plans’ investments are broadly diversified and include U.S. large and small capitalization stocks, international stocks, venture capital and other private equities, U.S. fixed income, global fixed income and real estate. Later in 1997, her group will also assume responsibility for structuring the investment options in HP’s 401(k) program. Ms. Obershaw received a BA in Economics from the University of California at Los Angeles in 1981 and an MBA from the Stanford University Graduate School of Business in 1983.
Required Reading (before class)
Luncheon
- Dan Lopez
- Paul Jones
Speaker
- Jeff Maggioncalda is President and Chief Executive Officer of Financial Engines, Incorporated. His experience spans applied finance, business strategy and software development. Before joining Financial Engines, he worked for McKinsey & Company’s high technology practice, where he analyzed such issues as the impact of the Internet on commercial banking, and the strategic use of information in the credit card industry. Previously, he conducted litigation research at Cornerstone Research, a Menlo Park, CA, consulting firm. He also assisted Intel Corp. CEO Andrew Grove on a strategic analysis of how the Internet will change the economics of the brokerage industry. Mr. Maggioncalda graduated with honors from Stanford University Graduate School of Business and also received his A.B. from Stanford, with honors in Quantitative Economics and English.
Required Reading (before class)
Luncheon
- Manuel Anguita
- Jeff Hartley
This page may change from time to time. It is expected that you will check it periodically. Ignorance of its latest content is not an excuse for lack of preparation.