The title of this course is also the title of a famous book that will be required summer reading. The course will introduce investment theory and cover a wide range of financial instruments including stocks, bonds, options, mutual funds, exchange traded funds, venture capital, private equity and real estate. We will review the returns that these assets have generated in the past and try to reconcile the returns and the risk in the framework of the capital asset pricing model (CAPM). The efficient market hypothesis will be covered as will the case for and against indexed investing. We will learn that diversification can offer a free lunch in that an efficiently diversified portfolio can simultaneously feature higher expected returns and less risk than an undiversified portfolio. While most of the course will be about U.S. markets, there will be some discussion of global and emerging markets. There will be a number of guest speakers, tentatively including Rob Wallace (who oversees the Stanford endowment), Charles Schwab, and Nobel Laureate Myron Scholes, John Williams (President of the San Francisco Federal Reserve), Joel Dickson (Senior Investment Strategist at Vanguard) and Katie Hall of Hall Capital Partners. There will be a day trip to San Francisco. I plan to involve a number of students who took this exact class several years ago and have them share their career path with us. Students will be required to write a short paper and make a twenty minute oral presentation to the class. The papers can cover an extremely wide range of topics and assistance in topic selection will be available.
Note: This SoCo course does not travel, but brings Wall Street to the students.
The Charles Schwab Professor of Economics, Senior Fellow at the Stanford Institute for Economic Policy Research and, by courtesy, at the Hoover Institution
John B. Shoven is the Trione Director of the Stanford Institute for Economic Policy Research and the Charles R. Schwab Professor of Economics at Stanford. He is also a Senior Fellow at the Hoover Institution and a Research Associate of the National Bureau of Economic Research. He specializes in public finance and corporate finance and has published on Social Security, health economics, corporate and personal taxation, mutual funds, pension plans, economic demography and applied general equilibrium economics. His books include The Real Deal: The History and Future of Social Security, Yale University Press, 1999 and The Evolving Pension System, Brookings Institution Press, 2005. His most recent book is co-authored with former Secretary of State and Treasury George Shultz and deals with both Social Security and health care reform in the U.S. (Putting Our House in Order: A Guide to Social Security and Health Care Reform, WWNorton, 2008). He also recently published a research paper on new ways of measuring age (“New Age Thinking: Alternative Ways of Measuring Age, Their Relationship to Labor Force Participation, Government Policies and GDP,” NBER Working Paper No. 13476. October 2007). His journal publications appear in such places as the American Economic Review, Journal of Economic Perspectives, and the Journal of Public Economics. In total, he has published more than one hundred professional articles and twenty books.
Professor Shoven is a Fellow of the American Academy of Arts and Sciences, a recipient of the Paul A. Samuelson Award for Outstanding Scholarly Writing on Lifelong Financial Security, and an award winning teacher at Stanford. He received his Ph.D in Economics from Yale University in 1973 and has been associated with Stanford ever since. He was Dean of Humanities and Sciences from 1993 to 1998. He is Chairman of the Board of Board of Cadence Design Systems and serves on the boards of American Century Funds, Exponent, Inc. and Financial Engines, Inc.