2016/17 Taught Postgraduate Module Catalogue

LUBS5052M International Investment

15 creditsClass Size: 200

Module manager: Professor Charlie Cai
Email: X.Cai@lubs.leeds.ac.uk

Taught: Semester 2 (Jan to Jun) View Timetable

Year running 2016/17

Pre-requisites

LUBS5004M

Corporate Finance

This module is not approved as an Elective

Module summary

International Investment builds upon the general financial knowledge obtained in LUBS5004M Corporate Finance. It is a specialist finance course with broad topic coverage. In this course you will learn how to extend the theoretical financial models presented in Corporate Finance in order to make them suitable for real-world application. Practical application gives rise to numerous questions and problems. Should the practitioner take theoretical financial results for granted? Would the models change if the investor is faced with real exchange rate risk? How would the set of regulations and constraints in different countries impact security valuation? International Investment allows you to explore these questions and develop more advanced financial models containing additional risk premia that investors face in practice. You will be made aware of the different rules and regulations that may affect valuation across countries. Additional asset classes, such as alternative investments and structured products will also be introduced. In the light of the increased importance of monitoring and regulation in finance, you will also be introduced to a framework for measuring and evaluating the performance of investment managers.

Objectives

This module aims to extend students’ knowledge of the capital markets theory covered in LUBS5004M Corporate Finance to the international context. Specifically, it provides a review of relevant theories underpinning exchange rate determination and forecasting, knowledge of theoretical and analytical tools for the construction of optimal portfolios internationally across a multitude of asset classes and the structure of the global portfolio management process within an institutional framework, the analytical skills necessary for the valuation of international shares, bonds and alternative investments and the knowledge of critical contemporary issues in international finance, asset pricing and portfolio choice to enable them to critically appreciate modern academic research in these fields.

Learning outcomes
Upon completion of the module students will be able to critically evaluate:
- the theories, which underpin portfolio construction and the pricing of assets in a multicurrency framework
- how the international monetary environment affects valuation of international equities and bonds
- the extent to which securities are priced efficiently across international markets and the factors, which may prevent the integration of financial markets
- the unique challenges and difficulties involved in building an optimal portfolio in a multicurrency environment
- the suitability of theoretical models for real-world application and use results from contemporary academic research

Skills outcomes
Upon completion of this module students will be able to:
Transferable
- Think independently and see regularities and connections between variables
- Argue logically and persuasively in an open-ended question environment structure and present ideas in a succinct, coherent and logical way
- Deploy computer literacy skills effectively

Subject Specific
- Competently apply quantitative and modelling skills to solve real-world investment problems

Syllabus

Indicative content
Foreign exchange (foreign exchange quotations, markets and international parity relations).
Foreign exchange determination and forecasting (factors affecting exchange rates and methodologies and models applied in exchange rate forecasting).
Portfolio theory in an international context (concepts of risk and return, two-asset portfolio theory, optimal risky portfolios, international correlations).
International asset pricing (ICAPM, factor models based on the APT).
Equity valuation in an international context (differences in accounting standards, the use of the dividend valuation model and P/E ratios to place values on shares, decomposition and analysis of P/E ratios).
The international bond market (mechanics, unique features, pricing, YTM calculation methods, valuation of FRNs and structured products).
Alternative investments (hedge funds, private equity and venture capital, real estate, commodities).
Performance measurement and evaluation (calculation of money-weighted and time-weighted rates of return, absolute and relative risk, tracking error, performance appraisal metrics).

Teaching methods

Delivery type	Number	Length hours	Student hours
Class tests, exams and assessment	1	3.00	3.00
Tutorial	10	3.00	30.00
Private study hours			117.00
Total Contact hours			33.00
Total hours (100hr per 10 credits)			150.00

Private study

- 30 hrs reading preparation for tutorials
- 40 hrs problem solving and project work for classes/workshops
- 47 hrs preparation for assessment.

Opportunities for Formative Feedback

- Via practical seminar work
- Students will be required to research various problems set for discussion during classes/workshops.

Methods of assessment

Exams

Exam type	Exam duration	% of formal assessment
Standard exam (closed essays, MCQs etc)	3 hr	100.00
Total percentage (Assessment Exams)		100.00

Normally resits will be assessed by the same methodology as the first attempt, unless otherwise stated

Reading list

The reading list is available from the Library website

Last updated: 05/05/2015

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