You are here:

Investments and portfolio management FN3024

The goal of the course is to broaden, and selectively deepen, students’ understanding of finance, building on their existing knowledge of financial economics.

Investments and portfolio management will examine the extent to which financial markets are informationally efficient. The course also studies the main empirical findings in behavioural finance. In addition, students will learn how to measure the performance of a portfolio manager and to attribute it to different types of skill. Finally, the course introduces the foundations of international finance and explores issues related to international portfolio management. Particular emphasis is given to issues related to international portfolio management and hedging strategies.

Topics covered

Main topics of the module include:

  • Notions of market efficiency
  • Return predictability in bond, stock, and derivatives markets
  • Limits to arbitrage and other theories of return predictability
  • Empirical evidence of the CAPM and other asset pricing models
  • Analyse different tests of market efficiency focusing on event studies and investment anomalies

Learning outcomes

If you complete the course successfully, you should be able to:

  • Evaluate investment decisions by examining the empirical behaviour of security prices.
  • Outline and critically assess the empirical evidence of the Capital Asset Pricing Model and Multifactor Models.
  • Master asset valuation by factor models and the arbitrage pricing theory.
  • Produce and analyse event studies to test market efficiency.
  • Identify investment anomalies and their link to return predictability.
  • Critically evaluate the main empirical findings in behavioural finance.
  • Measure asset management performance and attribute it to different types of skill.


Unseen written exam (3 hrs).

Essential reading

  • Investments by Zvi Bodie, Alex Kane and Alan Marcus, McGraw-Hill.
  • Inefficient Markets: An Introduction to Behavioral Finance by Andrei Shleifer, Oxford University Press.

Course information sheets

Download the course information sheets from the LSE website.