SDST3609 The statistics of investment risk (6 credits) Academic Year 2025
Offering Department SCDS (Department of Statistics and Actuarial Science) Quota ---
Course Co-ordinator Mr H Y Y Cheung, SCDS (Department of Statistics and Actuarial Science) < hcheung4@hku.hk >
Teachers Involved (Mr H Cheung,Statistics & Actuarial Science)
Course Objectives Most investments involve some risk.  The decision to invest or not is usually made against a background of uncertainty.  Whilst prediction of the future is difficult, there are statistical modelling techniques which provide a rational framework for investment decisions, particularly those relating to stock markets and the markets for interest rates, commodities and currencies.  Building upon research, both in Hong Kong and abroad, this course presents the prevailing statistical theories for prices and price-change in these vital markets.
Course Contents & Topics Concept of market efficiency, mean-variance portfolio theory, capital asset pricing model, arbitrage pricing theory, portfolio performance and management, behavioural finance.
Course Learning Outcomes
On successful completion of this course, students should be able to:

CLO 1 measure risk and return of portfolios
CLO 2 apply different approaches in constructing optimal investment portfolios
CLO 3 explain and apply asset pricing models and evaluate investment performance
CLO 4 explain the concepts of market efficiency and apply appropriate testing procedures to assess different forms of market efficiency
Pre-requisites
(and Co-requisites and
Impermissible combinations)		 Pass in SDST2602, or already enrolled in this course, or
Pass in (SDST1603 and any University level 2 course); and
Not for students who have passed in FINA2320, or have already enrolled in this course; and
Not for BSc(Actuarial Science) students
Only for students admitted in 2025 and thereafter.
Course Status with Related Major/Minor /Professional Core 2U000C00 Course not offered under any Major/Minor/Professional core
2024 Major in Risk Management ( Core/Compulsory )
2024 Minor in Risk Management ( Disciplinary Elective )
2023 Major in Risk Management ( Core/Compulsory )
2023 Minor in Risk Management ( Disciplinary Elective )
2022 Major in Risk Management ( Core/Compulsory )
2022 Minor in Risk Management ( Disciplinary Elective )
2021 Major in Risk Management ( Core/Compulsory )
2021 Minor in Risk Management ( Disciplinary Elective )
Course to PLO Mapping 2024 Major in Risk Management < PLO 1,2,3,4,5,6 >
2023 Major in Risk Management < PLO 1,2,3,4,5,6 >
2022 Major in Risk Management < PLO 1,2,3,4,5,6 >
2021 Major in Risk Management < PLO 1,2,3,4,5,6 >
Offer in 2025 - 2026 Y        1st sem    Examination Dec     
Offer in 2026 - 2027 Y
Course Grade A+ to F
Grade Descriptors
A Demonstrate thorough mastery at an advanced level of extensive knowledge and skills required for attaining all the course learning outcomes. Show strong analytical and critical abilities and logical thinking, with evidence of original thought, and ability to apply knowledge to a wide range of complex, familiar and unfamiliar situations. Apply highly effective organizational and presentational skills.
B Demonstrate substantial command of a broad range of knowledge and skills required for attaining at least most of the course learning outcomes. Show evidence of analytical and critical abilities and logical thinking, and ability to apply knowledge to familiar and some unfamiliar situations. Apply effective organizational and presentational skills.
C Demonstrate general but incomplete command of knowledge and skills required for attaining most of the course learning outcomes. Show evidence of some analytical and critical abilities and logical thinking, and ability to apply knowledge to most familiar situations. Apply moderately effective organizational and presentational skills.
D Demonstrate partial but limited command of knowledge and skills required for attaining some of the course learning outcomes. Show evidence of some coherent and logical thinking, but with limited analytical and critical abilities. Show limited ability to apply knowledge to solve problems. Apply limited or barely effective organizational and presentational skills.
Fail Demonstrate little or no evidence of command of knowledge and skills required for attaining the course learning outcomes. Lack of analytical and critical abilities, logical and coherent thinking. Show very little or no ability to apply knowledge to solve problems. Organization and presentational skills are minimally effective or ineffective.
Communication-intensive Course N
Course Type Lecture-based course
Course Teaching
& Learning Activities
Activities Details No. of Hours
Lectures 36.0
Tutorials 12.0
Reading / Self study 100.0
Assessment Methods
and Weighting
Methods Details Weighting in final
course grade (%)		 Assessment Methods
to CLO Mapping
Assignments Coursework (participation, assignments, tutorials, class test(s) and a group project) 40.0 1,2,3,4
Examination One 2-hour written examination 60.0 1,2,3,4
Required/recommended reading
and online materials		 Bodie, Z., Kane, A., and Marcus, A. J. (2021). Investments (12th Edition). McGraw-Hill.
Elton, E. J., Gruber, M. J., Brown, S. J., and Goetzmann, W. N. (2014). Modern Portfolio Theory and Investment Analysis (9th Edition). Wiley.
Luenberger, D. G. (2009). Investment Science (International Edition). Oxford University Press.
Capinski, M. J. and Kopp, E. (2014). Portfolio Theory and Risk Management. Cambridge University Press.
Defusco, R. A., McLeavey, D. W., Pinto, J. E., and Runkle D. E. (2007). Quantitative Investment Analysis, CFA Institute Investment Series (2nd Edition). Wiley.
Ruppert, D. (2004). Statistics and Finance: An Introduction. New York: Springer.
Course Website http://moodle.hku.hk
Additional Course Information