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Learn › University level › RS 302
RS 302 · Level 300 · Advanced

Portfolio Theory and Asset Pricing

This course teaches the mathematics of risk and return, how assets are priced, and how professionals build and judge portfolios. This free course by runs to ten modules and about 20 study hours.

The towers of Canary Wharf, London’s financial district, lit up at dusk across the Thames

Photo: King of Hearts, CC BY-SA 4.0, via Wikimedia Commons (cropped).

Start Module 1 →
You’ve completed 0 of 10 modules — 0%.

What you'll be able to do

  • Measure returns and risk correctly.
  • Compute the risk of a multi-asset portfolio.
  • Explain the efficient frontier, the CAPM and factor models.
  • Assess the evidence on market efficiency.
  • Evaluate a fund manager with risk-adjusted measures.
  • Write an asset allocation policy.
Before you startPrerequisite: RS 205 Statistics for Investors, Manage Your Risk. Tools used: a spreadsheet, the RiskStock portfolio tracker and paper trading account, index and fund fact sheets.
How this course worksEach module has objectives, the lesson with worked examples, a practice mission using a real filing, a RiskStock tool or a spreadsheet, and a quiz. Pass a module quiz with 75% to mark it complete; quizzes can be retaken as often as you like. When the modules are done, complete the capstone and the 20-question final exam (pass mark 70%, one retake every 24 hours). Passing both unlocks a certificate of completion, and completing all nine university-level courses earns the Advanced Diploma. Everything is saved in your browser; no account is needed.

The syllabus

Ten modules and about 20 study hours in all: short, dense lessons (about 55 minutes of reading), then the worked problems, practice missions, quizzes and the capstone.

1
Measuring returns Advanced
Calculate holding period, average, annualized, real and currency-adjusted returns.
~5 min read · ~2 hr with practice
○
2
Measuring risk Advanced
Calculate expected return, variance, standard deviation, covariance and correlation.
~5 min read · ~2 hr with practice
○
3
Portfolio mathematics and diversification Advanced
Compute the return and risk of a portfolio and explain why diversification works.
Video 3:38~5 min read · ~2 hr with practice
○
4
The efficient frontier and the capital allocation line Advanced
Describe the efficient frontier, add a risk-free asset and calculate the Sharpe ratio.
~6 min read · ~2 hr with practice
○
5
The capital asset pricing model Advanced
Derive required returns from the security market line and identify mispriced assets.
~5 min read · ~2 hr with practice
○
6
Beyond the CAPM, factor models Advanced
Describe the main return factors and calculate an expected return from a multi-factor model.
~5 min read · ~2 hr with practice
○
7
Market efficiency and behavioural finance Mastery
State the three forms of the efficient market hypothesis and the main behavioural biases.
~6 min read · ~2 hr with practice
○
8
Performance measurement Mastery
Calculate time-weighted and money-weighted returns and the main risk-adjusted performance measures.
~6 min read · ~2 hr with practice
○
9
Asset allocation Mastery
Write an investment policy and choose and maintain a strategic asset mix.
~6 min read · ~2 hr with practice
○
10
Active versus passive management Mastery
Explain the arithmetic of active management and weigh the evidence on fund performance and costs.
~6 min read · ~2 hr with practice
○
After the modulesThe capstone project →

Your notes

Every note you take in a module collects here. They're stored only in this browser, so export them to keep them.

Common questions

Is RS 302 really free?

Yes. All ten modules, the quizzes, the capstone, the 20-question final exam and the certificate are free and need no sign-up. Your progress, scores and notes are saved privately in your own browser.

What should I know before starting?

The suggested prerequisite is RS 205 Statistics for Investors, Manage Your Risk. This is a 300-level course and assumes those courses: the modules move quickly and use their terms without re-explaining them.

How long does it take?

About 20 study hours. The reading itself is short and dense, about 55 minutes; most of the time goes on the worked problems, the practice missions, the quizzes and the capstone.

Is the course for Canadian or US investors?

Both. Where rules, terms or tax treatment differ between Canada and the United States, the module says so and names both versions.

Is the certificate a professional qualification?

No. It is a certificate of completion from a free educational course. It is not a licence, an accreditation or a professional designation.

Who wrote this course?

It was written by Elizabeta Dimoska, founder and writer of RiskStock. RiskStock is educational and is not a registered dealer or adviser.

Keep learning

Related on RiskStock: Manage Your Risk · Asset allocation · RS 205 Statistics for Investors · All nine university-level courses

Educational content only — not investment, tax or legal advice. Companies, tickers and figures in this course are illustrative examples, not recommendations to buy or sell any security. Regulatory figures, limits and tax rules change; confirm current details with the regulator or tax authority. Worked examples are not forecasts. RiskStock is not a registered dealer or adviser, and its certificates are certificates of completion, not licences. Course written by Elizabeta Dimoska.