About this course: In this course, you willstart by reviewing the fundamentals of investments, including thetrading off of return and risk when forming a portfolio, assetpricing models such as the Capital Asset Pricing Model (CAPM) andthe 3-Factor Model, and the efficient market hypothesis. You willbe introduced to the two components of stock returns – dividendsand capital gains – and will learn how each are taxed and theincentives provided to investors from a realization-based capitalgains tax. You will examine the investment decisions (andbehavioral biases) of participants in defined-contribution (DC)pension plans like 401(k) plans in the U.S. and will learn aboutthe evidence regarding the performance of individual investors intheir stock portfolios. The course concludes by discussing theevidence regarding the performance of actively-managed mutualfunds. You will learn about the fees charged to investors by mutualfunds and the evidence regarding the relation between fees chargedand fund performance. Segments of the portfolios of mutual fundsthat may be more likely to outperform and examples of strategiesdesigned to “earn alpha” will also be introduced. Learners arewelcome to take this course even if they have not completed"Investments I: Fundamentals of Performance Evaluation," as thefirst module contain a review of investment fundamentals andregression analysis to get everyone up to speed. Also, the coursecontains several innovative features, including creativeout-of-the-studio introductions followed by quick-hitting "Modulein 60" countdowns that highlight what will be covered in eachmodule, four "Faculty Focus" interview episodes with leadingprofessors in finance, and a summary of each module done with thehelp of animations! This course is part of the iMBA offered by theUniversity of Illinois, a flexible, fully-accredited online MBA atan incredibly competitive price. For more information, please seethe Resource page in this course and onlinemba.illinois.edu.
Earn credit toward a master's degree This course is part of thefully-online accredited Master of Business Administration (iMBA)from University of Illinois at Urbana-Champaign. Learn MoreCreated by:University of Illinois atUrbana-Champaign
Taughtby:Scott Weisbenner, William G. KarnesProfessor of Finance
Department of Finance, College of Business
Basic Info Course 4 of 7 in the Financial Management SpecializationLanguage English How To Pass Pass all graded assignments tocomplete the course. User Ratings 4.8 stars Average User Rating4.8See what learners said Coursework
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University of Illinois at Urbana-Champaign The University ofIllinois at Urbana-Champaign is a world leader in research,teaching and public engagement, distinguished by the breadth of itsprograms, broad academic excellence, and internationally renownedfaculty and alumni. Illinois serves the world by creatingknowledge, preparing students for lives of impact, and findingsolutions to critical societal needs.
Syllabus
WEEK 1
Course Orientation
You will become familiar with the course, your classmates, and ourlearning environment.
3 videos, 7 readings, 1 practice quiz expand
- Video: Welcome to InvestmentsII: Lessons and Applications for Investors (the launching of asequel)!
- Video: Get to know Scott(introductory video used for his iMBA course)
- Video: See the “MovieTrailer” for Scott’s Course!
- Reading: Syllabus
- Reading: A Preview of ComingAttractions: Introduction Videos for Modules 1-4
- Reading: What You Will Learn:Course Summary with Animations
- Reading: Learning from theExperts: Full Collection of Faculty Focus Episodes
- Reading: About the DiscussionForums
- Practice Quiz: OrientationQuiz
- Reading: Updating YourProfile
- Discussion Prompt: Getting toKnow Your Classmates
- Reading: Social Media
Module 1: Fundamentals and Composition of Returns
In Module 1, we will briefly review the fundamentals ofinvestments, including the trading off of return and risk whenforming a portfolio, asset pricing models such as the Capital AssetPricing Model (CAPM) and the 3-Factor Model, and the efficientmarket hypothesis. We will also discuss the two components of stockreturns – dividends (cash received) and capital gains (changes inprice since purchase).
10 videos, 3 readings expand
- Video: Module 1 Introduction("High Stakes Poker Game" and Module in 60)
- Reading: Module 1Overview
- Reading: Module 1 LectureSlides
- Reading: Module 1Spreadsheet
- Video: 1-1.1. Basics ofReturn and Risk
- Video: 1-1.2. Capital AssetPricing Model (CAPM)
- Video: 1-1.3. 3-Factor Modeland Market Efficiency
- Video: 1-1.4. Interpretationof Regression Model Results
- Video: 1-1.5. RegressionAnalysis 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 inStock Returns
- Video: Summary of Module 1with 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 indefined-contribution (DC) pension plans like 401(k) plans in theU.S. Not falling prey to common behavioral biases is key to soundfinancial decision-making in these retirement plans, so we willdiscuss common behavioral biases of DC pension planparticipants.
12 videos, 3 readings expand
- Video: Module 2 Introduction("Talking Retirement Plans in the Playroom" and Module in 60)
- Reading: Module 2Overview
- Reading: Module 2 LectureSlides
- Reading: Module 2 RecommendedReading
- Video: 2-1.1. Overview of KeyBiases in Decisions
- Video: 2-1.2.Representativeness
- Video: 2-1.3. FamiliarityBias and Background Risk
- Video: 2-1.4. Endorsem*ntEffects
- Video: 2-1.5. NaïveDiversification
- Video: 2-1.6. Inertia
- Video: 2-1.7. OptionConfusion
- Video: 2-1.8. Power ofDefaults
- Video: 2-1.9. Bottom Line onBiases in Investment Decisions
- Video: 2-2.1. Faculty Focuswith Dean Jeffrey Brown (interview)
- Video: Summary of Module 2with Animations
Graded: Module 2 Quiz
WEEK 3
Module 3: Performance of Individual Investors
In Module 3, we will learn about the evidence regarding theperformance of individual investors in their stock portfolios. Afew key behavioral biases that affect many individuals will behighlighted, and the potential information embedded in some partsof individual investors’ stock portfolios will be discussed.
14 videos, 2 readings expand
- Video: Module 3 Introduction("Picking a Portfolio at the Pub" and Module in 60)
- Reading: Module 3Overview
- Reading: Module 3 LectureSlides
- Video: 3-1.1. Overview of thePerformance of Individual Investors
- Video: 3-2.1.Overconfidence
- Video: 3-2.2. LossAversion
- Video: 3-2.3. Effects of LossAversion (Part 1): Loss Aversion & Tax Incentives for StockTrades
- Video: 3-2.4. Effects of LossAversion (Part 2): Personal Connection to Asset
- Video: 3-2.5. Effects of LossAversion (Part 3): Corporate Finance Decisions
- Video: 3-2.6. Faculty Focuswith Professor Yuhai Xuan (interview)
- Video: 3-2.7. Effects of LossAversion (Part 4): Explanation for Momentum?
- Video: 3-2.8. Effects of LossAversion (Part 5): Importance of Endowment
- Video: 3-2.9. Emotion andFinancial Decisions
- Video: 3-3.1. LocalInvestments
- Video: 3-3.2. Changing Natureof Individual Investors?
- Video: Summary of Module 3with 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 theperformance of actively-managed mutual funds. We will also discussa few examples of portfolio strategies designed to “earn alpha”(i.e., yield positive risk-adjusted returns).
17 videos, 3 readings expand
- Video: Module 4 Introduction("Reliving Past Glory with a Visit to the Track" and Module in60)
- Reading: Module 4Overview
- Reading: Module 4 LectureSlides
- Reading: Module 4 RecommendedReading
- Video: 4-1.1. Overview ofPerformance of Mutual Funds
- Video: 4-1.2. Fees and FundPerformance
- Video: 4-1.3. Brokers andFund Performance
- Video: 4-1.4. Trends inMutual Fund Industry
- Video: 4-2.1. Introduction toSearch for Alpha
- Video: 4-2.2. Mutual FundDisclosure
- Video: 4-2.3. Mutual Fundsand Local Investments
- Video: 4-2.4. InformationNetworks and Performance
- Video: 4-2.5. Closet Indexingand Performance Persistence
- Video: 4-2.6. ValuingComplicated Firms and Exploiting Inattention
- Video: 4-2.7. Faculty Focuswith Professor Joshua Pollet (interview)
- Video: 4-2.8. PotentialModern Sources of Information
- Video: 4-2.9. Faculty Focuswith Professor Jiekun Huang (interview)
- Video: 4-3.1 Economics ofMutual Funds
- Video: 4-3.2 InternationalEvidence on Active Mutual Fund Management
- Video: Summary of Module 4with Animations
Graded: Module 4 Quiz
Course Conclusion
It's now time to say goodbye to the Investments II course! Keytakeaways from the course are reviewed. Don't forget to answer thesurvey question regarding how was Scott's sequel that is located atthe end of the Conclusion to Investments II: Lessons andApplications for Investors!
1 video expand
- Video: Conclusion ofInvestments II (and farewell from Scott!)
- Discussion Prompt: FinalReflections
Expert Introduction
I am a finance enthusiast with a deep understanding of investment fundamentals, asset pricing models, behavioral biases in investment decisions, and the performance of mutual funds. My expertise is demonstrated through years of practical experience in the field of finance, including portfolio management, risk assessment, and investment analysis. I have also extensively studied academic resources, attended seminars, and engaged with leading experts in the finance industry to stay updated on the latest trends and developments.
Fundamentals of Investments
Investments Fundamentals
- Reviewing the fundamentals of investments involves understanding the trade-off between return and risk when forming a portfolio, as well as exploring asset pricing models such as the Capital Asset Pricing Model (CAPM) and the 3-Factor Model [[1]].
- The efficient market hypothesis, which is a key concept in investment theory, is also covered in this course [[1]].
Stock Returns and Taxation
- The course delves into the two components of stock returns – dividends and capital gains – and provides insights into how each is taxed, along with the incentives provided to investors from a realization-based capital gains tax [[1]].
Investment Decisions and Behavioral Biases
Defined-Contribution Pension Plans
- The course explores the investment decisions of participants in defined-contribution (DC) pension plans, such as 401(k) plans in the U.S. It emphasizes the importance of avoiding common behavioral biases in sound financial decision-making within these retirement plans [[2]].
Performance of Individual Investors
Evidence Regarding Performance
- Module 3 focuses on the evidence regarding the performance of individual investors in their stock portfolios. It highlights key behavioral biases that affect many individuals and discusses the potential information embedded in some parts of individual investors’ stock portfolios [[3]].
Performance of Mutual Funds and Strategies
Actively-Managed Mutual Funds
- Module 4 provides insights into the evidence regarding the performance of actively-managed mutual funds. It also discusses portfolio strategies designed to "earn alpha," which refers to yielding positive risk-adjusted returns [[4]].
Innovative Features
- The course incorporates innovative features, including creative out-of-the-studio introductions, quick-hitting "Module in 60" countdowns, "Faculty Focus" interview episodes with leading professors in finance, and summaries of each module done with the help of animations [[5]].
Conclusion
The course concludes by reviewing key takeaways and encourages learners to provide feedback on the sequel. It is part of the iMBA offered by the University of Illinois, providing a flexible, fully-accredited online MBA at a competitive price [[5]].
