About this course: In this course, you will start by reviewing the fundamentals of investments, including the trading off of return and risk when forming a portfolio, asset pricing models such as the Capital Asset Pricing Model (CAPM) and the 3-Factor Model, and the efficient market hypothesis. You will be introduced to the two components of stock returns – dividends and capital gains – and will learn how each are taxed and the incentives provided to investors from a realization-based capital gains tax. You will examine the investment decisions (and behavioral biases) of participants in defined-contribution (DC) pension plans like 401(k) plans in the U.S. and will learn about the evidence regarding the performance of individual investors in their stock portfolios. The course concludes by discussing the evidence regarding the performance of actively-managed mutual funds. You will learn about the fees charged to investors by mutual funds and the evidence regarding the relation between fees charged and fund performance. Segments of the portfolios of mutual funds that may be more likely to outperform and examples of strategies designed to “earn alpha” will also be introduced. Learners are welcome to take this course even if they have not completed "Investments I: Fundamentals of Performance Evaluation," as the first module contain a review of investment fundamentals and regression analysis to get everyone up to speed. Also, the course contains several innovative features, including creative out-of-the-studio introductions followed by quick-hitting "Module in 60" countdowns that highlight what will be covered in each module, four "Faculty Focus" interview episodes with leading professors in finance, and a summary of each module done with the help of animations! This course is part of the iMBA offered by the University of Illinois, a flexible, fully-accredited online MBA at an incredibly competitive price. For more information, please see the Resource page in this course and onlinemba.illinois.edu.
Created by: University of Illinois at Urbana-Champaign
Taught by: Scott Weisbenner, William G. Karnes Professor of Finance
Department of Finance, College of Business
| Basic Info | Course 4 of 7 in the Financial Management Specialization |
| Language | English |
| How To Pass | Pass all graded assignments to complete the course. |
| User Ratings |
Complete this course to work toward:
Financial Management Specialization
This course is part of the 7-course Financial Management Specialization from University of Illinois at Urbana-Champaign
Master of Business Administration (iMBA)
This course is part of the fully-online 18 courses plus three capstone projects degree program
Syllabus
WEEK 1
Course Orientation
You will become familiar with the course, your classmates, and our learning environment.
3 videos, 7 readings, 1 practice quiz
- Video: Welcome to Investments II: Lessons and Applications for Investors (the launching of a sequel)!
- Video: Get to know Scott (introductory video used for his iMBA course)
- Video: See the “Movie Trailer” for Scott’s Course!
- Reading: Syllabus
- Reading: A Preview of Coming Attractions: Introduction Videos for Modules 1-4
- Reading: What You Will Learn: Course Summary with Animations
- Reading: Learning from the Experts: Full Collection of Faculty Focus Episodes
- Reading: About the Discussion Forums
- Practice Quiz: Orientation Quiz
- Reading: Updating Your Profile
- Discussion Prompt: Getting to Know Your Classmates
- Reading: Social Media
Module 1: Fundamentals and Composition of Returns
In Module 1, we will briefly review the fundamentals of investments, including the trading off of return and risk when forming a portfolio, asset pricing models such as the Capital Asset Pricing Model (CAPM) and the 3-Factor Model, and the efficient market hypothesis. We will also discuss the two components of stock returns – dividends (cash received) and capital gains (changes in price since purchase).
10 videos, 3 readings
- Video: Module 1 Introduction ("High Stakes Poker Game" and Module in 60)
- Reading: Module 1 Overview
- Reading: Module 1 Lecture Slides
- Reading: Module 1 Spreadsheet
- Video: 1-1.1. Basics of Return and Risk
- Video: 1-1.2. Capital Asset Pricing Model (CAPM)
- Video: 1-1.3. 3-Factor Model and Market Efficiency
- Video: 1-1.4. Interpretation of Regression Model Results
- Video: 1-1.5. Regression Analysis of Returns to Small-Value Stocks
- Video: 1-2.1. Dividends, Capital Gains, and Firm Payout Policy
- Video: 1-2.2. Realization-Based Capital Gains Tax
- Video: 1-2.3. Seasonality in Stock Returns
- Video: Summary of Module 1 with Animations
Graded: Module 1 Quiz
WEEK 2
Module 2: Investment Decisions in DC Pension Plans
In Module 2, we discuss the investment decisions of participants in defined-contribution (DC) pension plans like 401(k) plans in the U.S. Not falling prey to common behavioral biases is key to sound financial decision-making in these retirement plans, so we will discuss common behavioral biases of DC pension plan participants.
12 videos, 3 readings
- Video: Module 2 Introduction ("Talking Retirement Plans in the Playroom" and Module in 60)
- Reading: Module 2 Overview
- Reading: Module 2 Lecture Slides
- Reading: Module 2 Recommended Reading
- Video: 2-1.1. Overview of Key Biases in Decisions
- Video: 2-1.2. Representativeness
- Video: 2-1.3. Familiarity Bias and Background Risk
- Video: 2-1.4. Endorsement Effects
- Video: 2-1.5. Naïve Diversification
- Video: 2-1.6. Inertia
- Video: 2-1.7. Option Confusion
- Video: 2-1.8. Power of Defaults
- Video: 2-1.9. Bottom Line on Biases in Investment Decisions
- Video: 2-2.1. Faculty Focus with Dean Jeffrey Brown (interview)
- Video: Summary of Module 2 with Animations
Graded: Module 2 Quiz
WEEK 3
Module 3: Performance of Individual Investors
In Module 3, we will learn about the evidence regarding the performance of individual investors in their stock portfolios. A few key behavioral biases that affect many individuals will be highlighted, and the potential information embedded in some parts of individual investors’ stock portfolios will be discussed.
14 videos, 2 readings
- Video: Module 3 Introduction ("Picking a Portfolio at the Pub" and Module in 60)
- Reading: Module 3 Overview
- Reading: Module 3 Lecture Slides
- Video: 3-1.1. Overview of the Performance of Individual Investors
- Video: 3-2.1. Overconfidence
- Video: 3-2.2. Loss Aversion
- Video: 3-2.3. Effects of Loss Aversion (Part 1): Loss Aversion & Tax Incentives for Stock Trades
- Video: 3-2.4. Effects of Loss Aversion (Part 2): Personal Connection to Asset
- Video: 3-2.5. Effects of Loss Aversion (Part 3): Corporate Finance Decisions
- Video: 3-2.6. Faculty Focus with Professor Yuhai Xuan (interview)
- Video: 3-2.7. Effects of Loss Aversion (Part 4): Explanation for Momentum?
- Video: 3-2.8. Effects of Loss Aversion (Part 5): Importance of Endowment
- Video: 3-2.9. Emotion and Financial Decisions
- Video: 3-3.1. Local Investments
- Video: 3-3.2. Changing Nature of Individual Investors?
- Video: Summary of Module 3 with Animations
Graded: Module 3 Quiz
WEEK 4
Module 4: Performance of Mutual Funds and Search for Alpha
In Module 4, we will learn about the evidence regarding the performance of actively-managed mutual funds. We will also discuss a few examples of portfolio strategies designed to “earn alpha” (i.e., yield positive risk-adjusted returns).
17 videos, 3 readings
- Video: Module 4 Introduction ("Reliving Past Glory with a Visit to the Track" and Module in 60)
- Reading: Module 4 Overview
- Reading: Module 4 Lecture Slides
- Reading: Module 4 Recommended Reading
- Video: 4-1.1. Overview of Performance of Mutual Funds
- Video: 4-1.2. Fees and Fund Performance
- Video: 4-1.3. Brokers and Fund Performance
- Video: 4-1.4. Trends in Mutual Fund Industry
- Video: 4-2.1. Introduction to Search for Alpha
- Video: 4-2.2. Mutual Fund Disclosure
- Video: 4-2.3. Mutual Funds and Local Investments
- Video: 4-2.4. Information Networks and Performance
- Video: 4-2.5. Closet Indexing and Performance Persistence
- Video: 4-2.6. Valuing Complicated Firms and Exploiting Inattention
- Video: 4-2.7. Faculty Focus with Professor Joshua Pollet (interview)
- Video: 4-2.8. Potential Modern Sources of Information
- Video: 4-2.9. Faculty Focus with Professor Jiekun Huang (interview)
- Video: 4-3.1 Economics of Mutual Funds
- Video: 4-3.2 International Evidence on Active Mutual Fund Management
- Video: Summary of Module 4 with Animations
Graded: Module 4 Quiz
Course Conclusion
It's now time to say goodbye to the Investments II course! Key takeaways from the course are reviewed. Don't forget to answer the survey question regarding how was Scott's sequel that is located at the end of the Conclusion to Investments II: Lessons and Applications for Investors!
1 video
- Video: Conclusion of Investments II (and farewell from Scott!)
- Discussion Prompt: Final Reflections
FAQs
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Pricing
| Audit | Purchase Course | |
|---|---|---|
| Access to course materials | Available | Available |
| Access to graded materials | Not available | Available |
| Receive a final grade | Not available | Available |
| Earn a shareable Course Certificate | Not available | Available |
Ratings and Reviews
The prof Scott Weisbenner gives us great value with this course. It's so interesting and useful. All information provided helps me a lot in my choice where and in what to invest. Thank you prof Weisbenner!!!!
Through this lecture, I learned how to analyze strong financial statements. I learned a lot about accounting basic concepts such as how to calculate corporate value, internal rate of return, expected profit, and so on. I also learned basic knowledge of investment and how to construct a portfolio, and learned management and finance easily.
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