Should I enroll in Finance 6310??

That of course depends on both your objectives and on whether or not you are able to sit through a 3-hour class meeting without being overcome by the need to wear a baseball cap or a cowboy hat. With regard to the latter issue, unless your headware is required by deeply held religious custom which I'm pleased to respect, wearing a hat in the classrooms is just plain bad manners and will not be permitted in my section of Finance 6310. For those students with a compelling need to wear their baseball caps, I keep a bucket of baseballs in my trunk and if necessary I'm glad to reconvene the class on the practice fields at 7pm for infield practice if you are truly in search of an appropriate venue for wearing your hat.

With regard to objectives and expectations, many students expect that a course in Investment Management will teach them how to become wealthy within a relatively short time horizon by investing in the 'right stocks'. Unfortunately, any expectation that you can 'learn' to 'create' significant increases in wealth over a short period of time by 'beating the market' is totally unrealistic. Short-run trading is a zero-sum game (your gains have to be someone ele's losses) and if you plan to 'make money' by trading stocks on a short-run basis then you are going to be competing against a lot of very smart people who do a prodigious amount of investment research. Further, even if you could 'learn' to outsmart these really smart investment managers about half the time, on average the performance of these very smart people is 'guaranteed' to be no better than the performance of the broadly diversified market indexes, and so you would have gained relatively little at a very high cost in terms of transaction costs and the added risk involved in short-run trading strategies. Think of it this way, if it were possible to teach you how to earn above average returns through short-run stock trading, then everyone could become fabulously wealthy in short order, a prospect which seems rather implausible.

By now you may be thinking that if you can't learn to become wealthy a course in Investment Management just isn't worth taking--and you may be blaming me for being too lazy or else not sufficiently competent to show you the secrets of short-run wealth accumulation through the astute trading of stocks and bonds. Let me place myself in a more sympathetic light by noting that I'm just as interested as you are in making a quick killing in the stock market. Further, I'm convinced that from time to time the stock and bond markets present investors with situtations that offer short-run returns (over periods of 12 to 24 months) that are substantially in excess of the returns that investors typically earn for taking normal levels of market risk---I always think of these opportunities as situations where investors are being offered superior returns for providing liquidity to the market by being willing to own valuable securities that for a variety of reasons other investors cannot or will not hold in their portfolios.

Unfortunatlely, the kinds of 'profit opportunities' that I've just described don't happen along very often, and it's very easy to become convinced that a situation that involves extraordinary risk and dubious upside potential is a good investment opportunity---I think of this as the workings of 'the universal need to believe that it's easy to become wealthy'. That's why it's important to understand the magnitude of the long-run returns and the attendant risk that you can expect from investing in broadly diversified portfolios that track the performance of the widely know market indexes while you wait for a truly superior investment opportunity to come along (this tells you how much time and exposure to risk are required for you to become rich if you never identify any superior investment opportunities). Further, the risk management techniques that we will be discussing will help you think intelligently about the appropriate percentage of your investment capital to invest in an investment situation that you believe to offer superior returns. After all, if you are wrong about the merits of a 'special investment situation' or if a 'great investment turns out badly' then you want a substantial portion of your investment capital to live to fight another day. That's why I'm convinced that it's in your best interests to learn how to estimate and control both the diversifiable and the non-diversifiable risk of an investment portfolio. Finally, we're going to talk extensively about measuring the investment performance of other portfolio managers so that you won't be easily mislead by the claims of those who pretend to offer you superior investment performance.

If you remain interested in the course at this point, you should go ahead and download the Syllabus
for the Spring 2009 semester and review the course outline and the list of lecture topics for Spring 2009.

Return to Finance 6310 Home Page

To maximize compliance with the honor code during in-class examinations, it may be necessary to require that students sitting in adjacent seats take different versions of the respective midterm and final examinations. Attempts to circumvent the requirement that students sitting adjacent to one another must take alternate versions of in-class examinations will be treated as a serious violation of the honor code.

Professor Day believes strongly in the honor code. In fact, he loses sleep over the possibility that the hard work and dedication of his students might be devalued in any way by those few who would violate the honor code. Although it is impossible to completely eliminate violations of the honor code, Professor Day works hard to protect the value of your effort in his class.