Investments and Institutional Investors

The main purpose of this course is to introduce students to the basic principles of investment evaluation methods in a simple, intuitive, and practical way. The main goal is the detailed development of all the available financial methods of economic evaluation of the various investments that have an important role in the prosperity, efficiency and development of businesses, due to their short-term and long-term effects on its operation and the sacrifice of capital that their implementation requires. As part of teaching the course, a detailed analysis of all stages of investment evaluation will be carried out, starting with the identification and selection process of investment programs and continuing to the time horizon of the program, the frequency and adjustment of cash flows to the risk of the program taking into account the uncertainty and flexibility, the comparison of alternative investments and finally the correct choice of the most advantageous investment which will have the greatest added value to the company. Another main purpose of the course is the practical application, using Excel, of all the financial evaluation methods that determine the final decision to accept or reject an investment. We will also discuss direct financing and the important role that investment banks play in this process. We will analyze the concept of market efficiency and explain why market efficiency is important to financial managers. We will explain what an efficient capital market is considered and why “market efficiency” is important to financial managers. After a broad overview of the different ways in which asset management companies can be organized, special emphasis will be placed on the role of investment companies (mutual funds), which manage the majority of assets held by individual investors. The final part of the lectures will describe and compare the different types of institutional investors, examine their investment style and policies, and examine the influence of market efficiency on the performance of institutional investors.

With the successful completion of the course, students will be sufficiently capable to:

• Assess whether an investment is beneficial by applying all stages of investment evaluation
• Compare investments with different characteristics
• Evaluate an investment by properly accounting for depreciation, taxes, interest and inflation
• Assess to what extent changes in economic parameters can affect the expected result of the investment
• Perform sensitivity analysis, scenario analysis and Monte Carlo simulation
• Apply probabilistic approaches to investment analysis
• Value the real options embedded in investment programs
• Evaluate leasing and choose between purchase or leasing
• Explain the concept of an efficient capital market and explain why “market efficiency” is important to financial managers
• Describe the requirements of investors from professional asset managers
• Understand the role of Institutional investors and analyze their impact on financial markets