School of Management, (SOM)
 
SM88.2002 : Capital Markets  3(3-0)
 
Course objectives:
The objective of this course is for students to understand and comprehend the common financial and economic links between these two important asset classes, to analyze the key differences and then evaluate the relative benefits of each in a range of circumstances.
 
Learning Outcomes:
Upon completion of this course the student should be able to:
  • Comprehend the core similarities and critical difference between these two markets, both in a knowledge of what they are and, in an ability, to adapt analysis appropriately for each.
  • Analyze Financial Statements from each perspective and understand the signals standard financial statements send to each segment of the market.
  • Synthesize each of these areas into a broader understanding of how equity and fixed income markets interact, how evaluate signals from each, and how to begin to take this knowledge forward to consider asset allocation.
 
 
Pre-requisite(s):

None
 
Course Outline:
I.         Fixed Income Investing
1.      General Standards for Bond Investing
2.      Industry Specific Issues
3.      Understanding Covenants
4.      Special Factors

II.        Equity Investing
1.      General Standards for Equity Investing
2.      Industry Specific Factors
3.      The Dividend Factor
4.      Equity Rights

III.       Blending the Two
1.      Convertibles
2.      Callable Preferred Stock
3.      Debt with attached warrants

IV.       Analyzing the Balance Sheet and Cashflow – Fixed Income
1.      Book Value
2.      Significance of Current-Asset Value
3.      Cashflow is King
4.      Why Earnings are Unimportant

V.        Analyzing the Earnings - Equity
1.      Earnings
2.      Growth
3.      Extraordinary Losses & Special Items
4.      Spotting Earnings Manipulation
5.      Capitalization Structures and Impact

VI.      Combining the Two
1.      Where each can learn from the other
2.      The Power of Cashflow
3.      Asset Class Switching/Arbitrage
 
Laboratory Sessions:

None
 
Learning Resources:

Textbook:
•      Fabozzi, Frank, 2015, Capital Markets: Institutions, Instruments and Risk Management, 5th Edition, McGraw Hill.

•      Siddhartha Ghosh Dastidar, 2017, Capital Markets and Investments: Essential Insights and Concepts for Professionals, 1st Edition, Reading Light Publication

•      Claudia Zeisberger, Michael Prahl and Bowen White, 2017, Private Equity in Action: Case Studies from Developed and Emerging Markets, 1st Edition, Wiley
 
Reference Books:
•      Equity Asset Valuation, 3rd Edition, CFA Institute Investment Series, Wiley, 2015.
•      Capital Markets Union and Beyond, The MIT Press, 2019.
 
Journals and Magazines:
•      The Journal of Fixed Income, Euromoney Institutional Investor
•      The Journal of Investing, Euromoney Institutional Investor
•      Journal of World Trade, Kluwer Law International
•      The Asset, Asset Publishing and Research
•      Asiamoney, Euromoney Institutional Investor
 
Time Distribution and Study Load:
Lecture/discussion:            45 hours
Assignment:                          35 hours
Team project:                        45 hours
Self-study:                             55 hours
 
Teaching and Learning Methods:
Lessons will include formal lectures, with a strong focus on Socratic methods to develop comprehension and examine questions of application. The group valuation project will lead the students to apply this knowledge and analytical framework towards a synthesized consideration of dual-asset analysis in action, and to evaluate approaches to maximize the quality of insight gained from each market.
 
Evaluation Scheme:
Class Participation/presentation: 20%
Team Valuation Project:           25%
Mid-term Exam:                         15%
Final Exam:                                 35%
 
An A grade would indicate an exceptional understanding of the context being taught in classroom and, more importantly, particular ability in applying the key practical concepts relating to valuation and investment and developing an action plan to relate the criteria taught in class to investment decisions in the future. They will also have completed their range of assignments to a high level. A B grade would indicate an overall knowledge and understanding of the lesson that allows students to apply all these concepts relating to valuation and investment to their future program coursework and in a work environment.  C grade students are below average but still able to make their way through the work, albeit with lower comprehension and understanding. D students likely did not show up or did not try.
 
 
Instructor(s):
SECTION NAME
E Mr. Thomas Rodney Mason Bain