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Advanced Investments

Advanced Investments

Professor Steve L. Slezak, Ph.D.
University of Cincinnati

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Advanced Investments

Course No. 5751
Professor Steve L. Slezak, Ph.D.
University of Cincinnati
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3.4 out of 5
23 Reviews
52% of reviewers would recommend this series
Course No. 5751
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  • Audio or Video?
  • You should buy audio if you would enjoy the convenience of experiencing this course while driving, exercising, etc. While the video does contain visual elements, the professor presents the material in an engaging and clear manner, so the visuals are not necessary to understand the concepts. Additionally, the audio audience may refer to the accompanying course guidebook for names, works, and examples that are cited throughout the course.
  • You should buy video if you prefer learning visually and wish to take advantage of the visual elements featured in this course. The approximately 150 visuals featured in the video version greatly enhance the experience, particularly for those without prior investment experience or math expertise. On-screen text helps emphasize key points in each of the professor's lectures, while numerous specially created charts and graphs help to explain complex concepts that underlie investing fundamentals.
Streaming Included Free

What Will You Learn?

  • Learn three strategies for successful investing, including how to pick stocks that outperform their sector.
  • Explore one of the basic building blocks of any financial valuation method: the time value of money.
  • Survey several performance metrics to understand if your portfolio is producing worthwhile results.
  • Examine derivatives, including how to use and price them.

Course Overview

You’ve worked hard. You’ve saved. You’ve put your savings to work so that it will increase in value over time. In other words, you’ve invested. But are you earning the best return on your investments? Are you meeting your goals? Are you comfortable with your level of risk? How liquid are your investments?

Investing can be a valuable part of being able to achieve your hopes and dreams. It can help build a secure retirement. It can contribute toward paying for the education of your children and grandchildren. Income from your investments can help you build a legacy for family members or to support a cause you hold dear. In short, your investment decisions are some of the most important choices you make. Shouldn’t these be educated choices, supported by the best information, reasoning, and analytical techniques?

Whether you are starting out in your career, in your prime earning years, or retired, it is essential that you understand your investment choices in great detail—something that is not easy amid the flood of sure-fire strategies offered by books, television programs, online brokers, and professional wealth managers.

Consider the following decisions that face any investor in the market:

  • Active or passive? An active investing strategy takes advantage of mispriced securities that can be traded for a profit. A passive approach seeks to build a well-diversified portfolio that can be put on automatic pilot. Many investors combine these strategies.
  • What kind of securities? Securities are tradable assets, notably stocks and bonds. But they also include derivatives such as options, which are useful for hedging against losses. All securities are tools that work well under certain circumstances but not others.
  • Can you spot opportunities? How do you distinguish an opportunity from a pitfall? It’s crucial to know the most common mistakes that investors make and be familiar with the analytical tools that allow you to gauge a potential opening for financial gain.
  • Can you manage risk? Risk may be the most misunderstood factor in investing. Contrary to much financial advice, increasing your chance of success does not require increased risk. However, it does require measuring and managing risk effectively.

Advanced Investments puts you on the road to a thorough grasp of cutting-edge investment principles and practices, presented in 24 informative lectures by Professor Steve L. Slezak of the University of Cincinnati. Professor Slezak is Director of the university’s Carl H. Lindner III Center for Insurance and Risk Management, and the winner of multiple teaching awards for the clarity, excitement, and rigor of his instruction.

Master the Art of Investing

In Advanced Investments, you learn practical techniques for analyzing the central problem of investing: how to determine if a potential investment is a good deal. Using concepts from probability and statistics, you learn how to measure risk accurately. Then you explore methods for determining if a security will generate returns that compensate for its risk. Throughout the course, you constantly weigh the relative advantages of active and passive strategies, gaining an appreciation for how you can take active and passive positions in different securities.

Professor Slezak carefully explains the mathematics as he walks you through a rich range of problems and examples. You need not work out the solutions yourself, but it is vital that you have an intuitive grasp of how investors use formulas. You will learn the financial meaning of terms such as expected value, variance, covariance, and standard deviation. Unlike most other investment courses, Advanced Investments immerses you in the actual technical vocabulary and procedures used by professionals.

The video versions of the course have dozens of charts, diagrams, and on-screen equations that help you follow Professor Slezak’s many case studies and sample problems. The guidebook that accompanies the course also includes these graphics to aid those who choose the audio versions of the course.

A Course for the Serious Investor

Those who will benefit from the detailed information in this course include

  • anyone who holds a portfolio of stocks, bonds, or other securities, or wishes to start one;
  • those responsible for safeguarding an inheritance, endowment, or other substantial fund;
  • retirees and people approaching retirement;
  • new investors and students of finance who want to learn the best set of tools for building a portfolio;
  • industry professionals who wish to see financial quantitative analysis in action;
  • corporate employees who want greater insight into their firm’s financial operation; and
  • anyone interested in how the economy works—and sometimes doesn’t work, as in the financial crisis of 2008.

If you delegate the management of your investments to a professional, this course will give you the indispensible background to communicate your goals and monitor the performance of your portfolio. Professor Slezak stresses that “bad managers are out there!” Even managers who outperform the market over many periods may do so out of chance or because they have shifted to a low-risk strategy to protect their long-term ranking.

“Do Your Homework”

Some of Professor Slezak’s investment tips include these essentials:

  • Don’t act on hunches: Part of knowing is knowing when you don’t know. If you don’t have information that justifies an active position, then it’s better to be passive.
  • Think in terms of net present value (NPV): If you manage a business, NPV is the key measure for evaluating proposed projects. It also guides you in everyday decisions about the firm.
  • Variability by itself is not risk: Risk is often thought of as the variability in the return on a security. However, you can combine securities and actually control the risk.
  • Do your homework: Before you follow an active strategy, realize that with active management you are making bets. That realization should focus your mind on the kind of analysis you need to do.

When he was faculty advisor to the student-managed fund at the University of Cincinnati, Professor Slezak developed a framework that allowed students to actively manage their joint portfolio but that also tolerated a degree of benign neglect, due to the students’ busy lives. The same time constraints apply to many other investors, and you will find the professor’s framework a judicious mix of active investment strategies overlaid on a passive, well-diversified portfolio.

Professor Slezak enlivens his presentation with colorful anecdotes, allusions to his hobby of fine cooking, and object lessons from the recent history of Wall Street. His parting suggestion: “Don’t be afraid of the market.” Nothing is a sure thing, but the market has performed consistently over the long term. With Advanced Investments, you will build a solid foundation and hone the analytical skills that let you make judicious use of the market’s marvelous opportunities.

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24 lectures
 |  31 minutes each
  • 1
    Investment Decisions and Goals
    When it comes to wealth, more is better. But how important is liquidity to you? How important is risk? How important is being able to leave a legacy to members of your family or to causes you hold dear? As preparation for the course, consider these and other personal goals. x
  • 2
    A Framework for Investing
    Learn how to layer various types of active management strategies on top of a passive market portfolio. Professor Slezak outlines three primary strategies: timing the market, reallocating money across sectors, and picking stocks that may outperform their sector. He also describes shorting and arbitrage. x
  • 3
    Mistakes Investors Make
    It’s easy to fool yourself when making important investment decisions. Examine three common cognitive errors: framing, biased self-attribution, and seeing patterns where none exist. These natural human tendencies highlight the need to avoid emotional or illogical reactions to financial information. x
  • 4
    The Characteristics of Security Returns
    Review concepts from probability and statistics that are essential to know in investing. Focus on formulas that measure three characteristics of an asset: its expected return, its return variance (or volatility), and the covariance (or correlation) of its return with the returns on other assets. x
  • 5
    The Theory of Efficient Markets
    Is it possible to make money by actively trading in the market? According to the efficient markets hypothesis, you are better off as a passive investor, because prices almost always reflect true value. Explore three versions of this theory, including the weak form, which holds that prices follow what is called a random walk. x
  • 6
    Evidence on Efficient Markets
    Continue your study of the efficient markets hypothesis by investigating data from actual markets. Focus on momentum phenomena and volatility anomalies as possible evidence of market inefficiencies. Are these real opportunities to beat the market or only illusions that snare overconfident investors? x
  • 7
    Valuation Formulas
    Explore one of the most basic building blocks of any financial valuation method: the concept of the time value of money. Obtain formulas for present value, future value, and net present value. Then use these tools to solve a problem in retirement planning. x
  • 8
    Bond Pricing
    Investigate bond pricing, which compared to stock pricing is beautifully predictable—if complex. Understand why interest rates vary across different bonds. Practice calculating the bond price for a given rate. Then take the price as given, and determine the yield to maturity. x
  • 9
    The Term Structure of Interest Rates
    At a given moment, interest rates vary with the time to maturity of different bonds. Examine the yield curve and the term structure of interest rates, learning how to weigh your investment choices. Discover that bond prices are a window to the expected future performance of the market. x
  • 10
    The Risks in Bonds
    Learn how to think about the risks of owning bonds. Start by considering interest rate risk. Then examine how default or credit risk affects the yields on bonds. While most investors only want to consider highly rated bonds, significant return can be earned by bearing default risk. x
  • 11
    Quantifying Interest Rate Risk
    Get an intuitive feel for the features that raise or lower interest rate risk on bonds. Practice calculating duration, and discover that the time to maturity may not be particularly close to the duration of a bond. This underscores the importance of focusing on the duration of your bond investments. x
  • 12
    Value Creation and Stock Prices
    Consider how the equity returns on two firms that are essentially in the same business can be very different based solely on differences in capital structure. Both can be efficiently priced, but one will have a higher equity return due to its higher leverage and resulting risk. x
  • 13
    Present Value of Growth Opportunities
    Use the formulas developed in Lecture 7 to analyze the present value of a firm under different scenarios. By employing a simple model, you will be able to identify how managerial decisions in a well-run company can lead to increased stock price. x
  • 14
    Modeling Investor Behavior
    Good investors are not necessarily those who can find good investments, but those who can predict what stocks others will pick. Learn how economists model investor behavior, focusing on the indirect utility function, which can predict people’s aversion to variations in outcome. x
  • 15
    Managing Risk in Portfolios
    Investors do not—and should not—hold just one security at a time. Explore strategies for combining securities into a variety of optimal portfolios. For any level of risk, such portfolios have the highest average return; and, for any level of average return, they have the lowest risk. x
  • 16
    The Behavior of Stock Prices
    Learn to use regression analysis to quantify the characteristics of a security, particularly its risk and possible mispricing relative to an asset pricing model. One of Professor Slezak’s goals is to introduce techniques that allow you to analyze data that is widely available on the Internet. x
  • 17
    The Capital Asset Pricing Model (CAPM)
    Study the characteristics of an equilibrium asset pricing model. Then build the most popular version—the capital asset pricing model (CAPM)—which allows you to measure risk for a portfolio. According to CAPM, the cross- section of returns is driven by common risks that cannot be eliminated through diversification. x
  • 18
    How to Exploit Mispriced Securities
    Explore three steps for exploiting mispriced securities. First, investigate the strategy of short selling. Then, develop a measure of mispricing called alpha. Finally, use information about a stock’s alpha and its volatility to form an optimal risky portfolio. x
  • 19
    Performance Evaluation
    How do you know if an actively managed portfolio is producing worthwhile results? Survey several performance metrics: the Sharpe ratio, the Treynor measure, Jensen’s alpha, the M-squared measure, and the information ratio. The measure you need depends on how you are using the portfolio you are evaluating. x
  • 20
    Market Making and Liquidity
    Probe the nature of liquidity, learning how it is defined, how to measure it, and when to pay the market price for a liquid security. Many less-well-known stocks may be less liquid. But because they are less well-known, they are more likely to be mispriced, presenting potential trade opportunities. x
  • 21
    Understanding Derivatives
    Begin your examination of derivative securities, first by defining them and then by looking at option contracts called “puts” and “calls.” Also examine how a lack of transparency in a type of derivative called credit default swaps contributed to instability during the financial crisis of 2008. x
  • 22
    Using Derivatives
    Investigate two uses for options: speculation and hedging. Follow the steps for betting on the direction of movement in the price of a security. Then see that hedging is less risky and can be compared to buying insurance. Learn that the important variables in a hedge are the hedge ratio and the option delta. x
  • 23
    Pricing Derivatives
    Continue your study of derivatives by looking at the two most popular strategies for pricing options: the binomial method and the revolutionary Black-Scholes formula. The key insight of these pricing models is that you can build structures out of existing securities that behave just like the underlying option. x
  • 24
    Trade Opportunities or Risk?
    Return to the capital asset pricing model introduced in Lecture 17, evaluating its effectiveness. Then analyze alternatives to CAPM along with anomalies that are at odds with existing models. Close by putting the course into perspective, stressing the wisdom and profit of trusting the market in the long term. x

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Your professor

Steve L.  Slezak

About Your Professor

Steve L. Slezak, Ph.D.
University of Cincinnati
Dr. Steve L. Slezak is Associate Professor of Finance at the University of Cincinnati and Director of the university's Carl H. Lindner III Center for Insurance and Risk Management. He earned his Ph.D. in Economics from the University of California, San Diego. Before joining the University of Cincinnati, he was on the faculty of the finance departments at the University of Michigan and The University of North Carolina at...
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Reviews

Advanced Investments is rated 3.4 out of 5 by 23.
Rated 2 out of 5 by from For Advanced Investors -- Duh, Huh? This course was mostly about mathematical equations. Yes, the Capital Asset Pricing Model was the topic of one lecture. However Investopedia can help you get your arms around CAPM in about 5 minutes and I'm not sure this course ever does. Re: the notion that this course should not receive below 4 stars due to the invaluable information, remember, there are lots of quant jocks working for very large research houses and money management firms. Notice that when they run their discounted cash flow analyses, no two firms come up with the same "fair value" for a given stock. It is not as cut and dried as x sub one plus x sub two plus x sub n. If Advanced Investments is all about CAPM, appropriate return for a given level of risk, etc., there are lots of tools created by very smart people that are available to investors. Sharpe Ratio, Sortino Ratio and Treynor Ratio are a few such tools that people could make use of if they had some basic instruction. This course was not helpful to that end.
Date published: 2017-03-17
Rated 5 out of 5 by from A great course for the mathematical inclined This is a great course for those who have taken the introductory courses on finance and investments. The course has many formulas and may be a bit intimidating for those who are not mathematically included. It is definitely and advance courses, as mentioned in the title.
Date published: 2017-02-27
Rated 4 out of 5 by from Beware!!! This course is a serious course on a topic with widespread utility, well presented, and with an excellent lecturer. It addresses bonds, stocks, and derivatives (calls and puts) in a college-level, technical manner. However, there are also significant warnings: First, understanding the content of this course depends on understanding basic college-level probability and statistics and on understanding least squares linear regression. Although the course addresses these topics in Lectures 7 and 16, if you are not already comfortable with these topics, you may not get as much from this course as you hope. Second, there are lots and lots of calculations in this course. This renders the audio version of this course largely ineffectual. Unless you are already a professor of finance, you will need to see the calculations in the video version in order to follow what is being said. You may also want to stop the recording and physically work out some of the calculations yourself. Third, just reciting the calculations makes this difficult to follow. Consider this typical discussion from the 22 minute mark in Lecture 10. “In the Caa case, if the cumulative entry for the two years is 40%, then the probability that it survives until t equals three is 1 - 0.4 or 0.6 or 60%. And what is the probability that it defaults during the third year? If the entry for two years is 40% and the entry for three years is 48% then the probability it defaults in the third year is simply the marginal probability, it’s 48% - 40% which is equal to 8%. Then out of the 60% of the times that it gets to Year 3, only 8% of those times does it default in the third year. That is, the hazard rate for the third year is 8 divided by 60 or 0.133 or 13.3%.” You really can’t follow this on audio while driving a car. In short, in order to follow this course effectively, you must be comfortable with probability, statistics, and linear regression, you must use the video version, and you must frequently stop the recording to work out example problems on your own.
Date published: 2016-12-08
Rated 5 out of 5 by from Expectations This course was much more in depth than I expected, having to review several of the lectures to absorb the information, formulas, and concepts. I wish I'd had this years ago before I retired, but now that I have the information, I hope to avoid some mistakes that I might otherwise have made. I'm really enjoying these courses!
Date published: 2016-06-30
Rated 5 out of 5 by from
Date published: 2016-01-28
Rated 1 out of 5 by from First Course I Have Returned I struggled off and on for many months to engage with this course, but I ultimately had to give up and make my first return (after purchasing over 60 courses over the past 12 years). As other reviewers have noted, the course is very math intensive with numerous equations and formulas, most of seemingly limited practical application. I found the lectures tedious and frequently very hard to follow (I watched the first ten lectures before giving up). The course seems to be geared to investment professionals who need to understand and use the technical formulas that underlie various investments and investment concepts -- not to the average investor or the experienced investor seeking to manage his or her personal portfolio. I had high hopes for the course but was very disappointed. That said, I learned that the Great Courses return process is extraordinarily user friendly. If you are inclined to take the course, I would recommend the video version so that you can see the mathematical equations that are frequently displayed.
Date published: 2015-10-26
Rated 5 out of 5 by from Advanced Investments If you are directly exposing your wealth to the market, then this course is mandatory. If you buy/sell equities based on the morning business news or internet "expert" sites, then don't waste your time. The course in dense in material presented and is fast paced. Although there is some math, it doesn't require multi-variable calculus to understand. The math demonstrates how the metrics are derived which important when determining which metric to utilize. I recommend you don't skip the math. This course will not make you an expert but will give you the tools to be an informed investor. Like anything else, you get from this course only what you are willing to put into it.
Date published: 2015-04-06
Rated 2 out of 5 by from I have a BS in Business and Economics (1974) and MAT(1990) and found this very difficult to follow. Assigning numeric values to variables in equations that I cannot see doesn't work. Also defining those variables with concepts that are defined differently by each individual creates problems for me. I did not expect such abstraction.
Date published: 2014-11-23
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