Prof Christopher Polk

This course is available on the MSc in Finance (part-time). This course is not available as an outside option to students on other programmes. This course uses controlled access as part of the course selection process. For information on controlled access courses, including eligibility, application processes, deadlines, and departmental contact details, please refer to the Controlled Access Courses webpage.

All students on a programme listed above will be given a place. The course is not capped.

Please contact finance.teachingmanager@lse.ac.uk with any queries.

This course does not permit auditing students.

Pre-requisites:

Students must have completed FM422E and FM423E before taking this course.

• Portfolio optimization and the Black-Litterman model
• Dynamic Investment Strategies
• Selecting and Monitoring Portfolio Managers: Mutual funds and hedge funds
• Transactions Costs and Liquidity Risk

The course covers a wide range of topics in portfolio management, with a particular focus on empirical applications. The first part of the course reviews the basics of portfolio theory and develops the Black-Litterman approach to portfolio optimization. The second part of the course introduces students to the implementation of several dynamic investment strategies and to the estimation of their performance; portfolio strategies include size, value, momentum, betting-against-beta, and quality-minus-junk. The third part of the course focuses on selecting and monitoring portfolio managers, emphasizing the identification of selectivity, allocation, and timing skills for mutual funds and hedge funds. The last part of the course examines trading costs and liquidity risk, as well as their impact on the profitability of investment strategies. The course is based on recent empirical studies and applied exercises using financial data.

30 hours of lectures in the Autumn Term.

This course is taught in an interactive format. There is no distinction between lectures and classes/seminars; there are simply “sessions” where the pedagogical approach is always interactive.

Students will be expected to complete coursework regularly.

The course will rely on a blend of readings, lectures, cases, and discussions. Useful background references include

• Bodie, Kane, and Marcus, Investments, 12th Ed., McGraw Hill
• Elton, Gruber, Brown, and Goetzmann, Modern Portfolio Theory and Investment Analysis, 9th Ed., Blackwell’s
• Litterman, Modern Investment Management, John Wiley & Sons

Continuous assessment (100%).