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, Emeritus
John B. Shoven is the Charles R. Schwab Professor of Economics Emeritus and a Senior Fellow at the Stanford Institute for Economic Policy Research and the Buzz and Barbara McCoy Senior Fellow at the Hoover Institution. He has published over 100 articles and written or edited 20 books and is chairman of the board of Cadence Design Systems and on the boards of American Century Funds, Financial Engines, and Exponent, Inc. In 2003, Prof. Shoven received the Dean's Award for Outstanding Teaching.