Dr P Frantz, E310 and Dr E Beccalli

This course is intended for students on the MSc Accounting and Finance, MSc Law and Accounting, MSc Management and Strategy and MSc Management and Regulation of Risk. Other students may be admitted to the course if they have a reasonable knowledge of accounting or finance acquired at undergraduate or equivalent level, and only with the agreement, in writing, of the MSc (Accounting) Course Tutor.

The aim of this course is to introduce students to security analysis and valuation from both theoretical and empirical perspectives. Student are furthermore provided with an opportunity to apply their skills by valuing, in small groups, from the point of view of a “sell-side analyst”, a firm’s equity of their choice using technologies based on the present values of free cash flows and economic value added. The course should appeal to students interested in investment analysis and fund management.

The course comes in three parts. The first part, financial analysis, focuses on past and present performance evaluation, which is used by financial analysts to generate expectations about future performance (prospective analysis). The second part, security valuation, focuses on the determination of intrinsic security prices, which, in efficient markets, reflect prospective performance. The third part, returns to fundamental and technical analysis, provides empirical evidence on returns to trading strategies based on either financial analysis or past stock returns.

Teaching arrangements consist of lectures (18 hours) and classes (8 hours), and presentations of corporate valuation projects by students (MT).

Lectures are based on E. Beccalli and P. Frantz, Valuation and Securities Analysis (forthcoming). Other books recommended include S Penman, Financial Statement Analysis & Security Valuation (McGraw-Hill, 2003) as well as K Palepu, B Healy & V Bernard, Business Analysis & Valuation (South-Western College Publishing, 2003). For background reading: T Copeland, T Koller & J Murrin, Valuation: Measuring and Managing the Value of Companies (Wiley, 2000), for the corporate valuation project. The course also relies on journal articles published in the financial analysis and financial markets literatures.

A two-hour written examination (weight 70%) and the corporate valuation project report (weight 30%).