PORTFOLIO MANAGEMENT AND ANALYSIS

The objective of this course is to acquire theoretical and practical knowledge about the classic modern portfolio management framework. Using the modern portfolio theory of Markowitz, the course introduces the basic principles of the portfolio management process. To this end, the well-known risk-return trade-off to which financial assets and investments are subject is introduced. The expected return represents the reward of such investment portfolios and needs to be balanced with portfolios’ risk. Large rewards usually bear greater risk. In this light, the choice of an appropriate risk measure is emphasized, and the optimal trade-off between risk and return is also defined. A particular attention is paid to portfolio diversification so as to reduce portfolios’ risk and to improve their risk-return trade-off (i.e. efficient diversification). Moreover, two important principles are emphasized among which the capital allocation between risky assets and risk-free assets, and the asset allocation between risky assets. The asset allocation process drives the risk-return trade-off of investment portfolios. Finally, portfolio performance measures are studied. Such measures help rank investment portfolios according to their performance profile (e.g. reward per unit of risk)