FM412      Half Unit
Quantitative Security Analysis

This information is for the 2024/25 session.

Teacher responsible

Dr Jean-Pierre Zigrand

Availability

This course is available on the Global MSc in Management, MSc in Finance (full-time), MSc in Finance (full-time) (Work Placement Pathway), MSc in Finance (part-time), MSc in Finance and Economics, MSc in Finance and Economics (Work Placement Pathway), MSc in Finance and Private Equity, MSc in Finance and Private Equity (Work Placement Pathway) and MSc in Finance and Risk. This course is not available as an outside option.

Global MSc in Management (Accounting and Finance concentration only)

This course is not capped, any eligible student that requests a place will be given one.

This course does not permit auditing students.

Pre-requisites

Some familiarity with finance and accounting.

Course content

This applied course uses theoretically well-founded quantitative analysis tools to uncover value in equity, debt, property, credit and volatility markets.

A simple fundamental valuation concept guides the student along a consistent, unified and logical thread in search of finding value in all of those markets.

Determining whether an asset class is of good or poor value also relies on an awareness of the macroeconomic and macrofinancial environment. Macroassets, such as fixed income and global equities markets, reflect this macro environment and are in turn required inputs into the valuation of both macro- and microassets. In this manner, we get by design a view that is coherent across markets.

For instance, the state of the macroeconomy (such as the phase of expansion and recession, the real estate cycle, the inflationary environment, the central bank rate setting policy, or the level of financial stability and risk) is shown to be mirrored in the nominal and real yield curves as well as in the macro risk-premia of the debt, equities and property markets that in turn trickle down to influence the value considerations of all of the micro-assets, including individual equities or credit.

Armed with these tools, we can then study how, in real life, style investors such as value, growth, quality or momentum approach the question of finding good deals from their own vantage points in the given macro environment. We cover colourful case studies, some of which possibly live, that include the detailed modelling of real-life corporate events via Excel spreadsheets based on the careful study of financial statements, balance sheets and analyst reports. Does management create or destroy value? Does growth create value, and how does one value growth? Is there a case for an activist restructuring of P&G? Is Amazon overpriced compared to other bricks and mortar retailers? Should Amazon be priced as a cloud provider? Is property overvalued? How would a value investor approach Intel, and would they buy Intel? Is value dead? How can value be complemented by quality? Is volatility overpriced?

Part I. Introduction. The challenge of active investing. The importance of NPV.

Part II. Valuation methodology

Part III. Valuing macroassets: Global Yield Curves

Part IV. Valuing macroassets: Diversified Equity Portfolios

Part V. Methodology: RADR, DDM

Part VI. Valuing macroassets: Property

Part VII. Valuing microassets: Equities Valuation

Part VIII. Valuing microassets: Case Studies in Value and Growth

Part IX. Different Styles for Identifying Value in Individual Equities

Part X. Valuing macroassets: Volatility

Teaching

30 hours of seminars in the WT.

Formative coursework

Students will be expected to complete 2 group projects. In the first project, students study the historical performance of a chosen publicly traded company and analyse and value the equity on a forward-looking basis, evaluate its risks and make an investment recommendation. The second project requires the students to study and critically examine the investment decisions and style of a well-known value investor.

Indicative reading

Books

• Greenwald, B, Kahn, J., P. Sonkin, M. van Biema, Value Investing: From Graham to Buffett and Beyond, Wiley Finance, 2004.

Background reading:

• Koller. T., M. Goedhard, and D. Wessels (McKinsey and Company), Valuation: Measuring and Managing the Value of Companies, Wiley, 2015.

Numerous articles written by well-known practitioners and policy makers

Assessment

Continuous assessment (100%) in the WT.

Key facts

Department: Finance

Total students 2023/24: 86

Average class size 2023/24: 46

Controlled access 2023/24: No

Value: Half Unit

Guidelines for interpreting course guide information

Course selection videos

Some departments have produced short videos to introduce their courses. Please refer to the course selection videos index page for further information.

Personal development skills

  • Leadership
  • Self-management
  • Team working
  • Problem solving
  • Application of information skills
  • Communication
  • Application of numeracy skills
  • Commercial awareness
  • Specialist skills