This is an advanced course for investors in the market, covering cutting-edge investment principles and practices used by professionals. You learn hands-on techniques for analyzing the central problem of investing: How to determine if a potential investment is a good deal. Employing concepts from probability and statistics, you learn how to measure risk accurately. Then you explore methods for determining if a given security, such as a stock or bond,...

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.

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.

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.

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.

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?

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.

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.

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.

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.