This course begins with a broad overview of investment environment and describes financial instruments and their markets. Then it deals with the risk and return of an individual asset as well as that of portfolios, and the selection of optimal portfolio.

The aim of this course is to provide students the fundamental knowledge on investing insecurities. Specifically, it aims at enabling students to understand financial markets, estimate riskand return from the securities, appraise them to form portfolio for investment, and analyze the economy and the industry in which they make an investment.

Unit 1: Investment Environment (5 LHs) 
Meaning of investment; The investment process; Real assets and financial assets; Typesof financial assets; Financial intermediaries; Financial markets; Efficient markets; Major players in the financial markets; Ethical issues in investing.

Unit 2: Securities Markets (8 LHs) 
Concept and types of securities markets; Trading of securities; Types of markets; Typesof orders; Trading mechanisms; The rise of electronic trading; ECNs; New tradingstrategies; Globalization of stock markets; Trading costs; Buying on margin; Short sales;Construction of stock market indexes – price-weighted index, value-weighted index,equally-weighted index; Functions of Nepal Stock Exchange; and Role of NepalSecurities Board.

Unit 3: Risk and Return (7 LHs) 
Concepts of risk and return; Measuring investment returns: holding period return, returnsover multiple periods, annualizing rates of return, expected return, time series of return; Inflation and real rates of return; Measuring risk: variance, standard deviation, coefficientof variation; and Portfolio return and risk of a portfolio of risky and risk-free assets.

Unit 4: Efficient Diversification and CAPM 7 LHs
Diversification and portfolio risk; Asset allocation with two risky assets; Covariance andcorrelation; The risk-return trade-off with two-risky-assets; The mean-variance criterion;The optimal risky portfolio with a risk-free asset; Efficient diversification with manyrisky assets; The efficient frontier of risky assets; Choosing the optimal risky portfolio;The Capital Asset Pricing Model: the model, assumptions, implications, and the securitymarket line.

Unit 5 : Bond Prices and Yields 5 LHs
Bond pricing; Bond pricing between coupon dates; Bond pricing in excel; Bond yields:yield to maturity, yield to call, realized compound return versus yield to maturity; Bondprices over time; and Yield to maturity versus holding-period return.

Unit 6: Equity Valuation 5 LHs
Fundamentals of equity valuations; Intrinsic value versus market price; Dividend discount models: the constant-growth and multistage growth models; Price–earningsratios; and pitfalls in P/E analysis.

Unit 7: Macroeconomic and Industry Analysis 5 LHs
Domestic macro economy; Government policy: fiscal policy and monetary policy;business cycles; Economic indicators; Industry analysis: defining an industry, sensitivityto business cycle, sector rotation, industry lifecycles, and industry structure andperformance.

Unit 8: Technical Analysis 6 LHs
Concept; Underlying assumptions; Advantages; Challenges; Technical trading rules andindicators: contrary-opinion rules, follow the smart money, momentum indicators, stockprice and volume techniques.