Module

Investment Analysis 2

Module description

This module involves developing and appraising critically a set of competing models of corporate valuation, including the dividend discount model (DDM), discounted free cash flows (FCFE) model, residual income model and their reconciliation. It covers forecasting of earnings and estimating of discount rate in valuation. It also establishes links between fundamental valuation models and value multiples. Finally, it discusses equity investment informed from firm’s fundamental analysis.

Additional Information:

Research in Teaching

The whole module is informed by academic research, in particular by the module lead.

Full module specification

Module title:Investment Analysis 2
Module code:BEAM038
Module level:M
Academic year:2020/1
Module lecturers:
  • Professor Pengguo Wang - Convenor
Module credit:15
ECTS value:

7.5

Pre-requisites:

None

Co-requisites:

BEAM032 Investment Analysis 1

Duration of module: Duration (weeks) - term 2:

11

Module aims

Investment Analysis 2 aims to teach you various equity valuation techniques and apply them to the valuation of equities in major industrial sectors. This variety of geographic, industrial and other specialised circumstances requires careful selection of appropriate valuation methods and the interpretation of different standards of financial reporting and disclosure. This involves developing and appraising critically a set of competing models of corporate valuation. Ultimately, the aim is to give students the ability to produce equity research reports to professional standards.

ILO: Module-specific skills

  • 1. apply selectively and critically 'new' value enhancement and valuation paradigms
  • 2. explain the proper focus of investment analysis in the modern equity environment
  • 3. perform and respond creatively to cross-border financial analysis in industrial sectors
  • 4. apply selectively traditional risk measures
  • 5. identify and discuss ethical issues affecting corporate operations and reporting

ILO: Discipline-specific skills

  • 6. review and select appropriate analytical techniques
  • 7. access and critically review research reports and other data sources
  • 8. draw well-defined and supported conclusions when analysing a complex and specialised problem.

ILO: Personal and key skills

  • 9. as an individual to present complex, technical reports.
  • 10. work effectively in a group setting

Learning activities and teaching methods (given in hours of study time)

Scheduled Learning and Teaching ActivitiesGuided independent studyPlacement / study abroad
331170

Details of learning activities and teaching methods

CategoryHours of study timeDescription
Scheduled learning and teaching activities22Lectures
Scheduled learning and teaching activities11Practical classes
Guided Independent Study117Reading, preparation for classes and assessments

Formative assessment

Form of assessmentSize of the assessment (eg length / duration)ILOs assessedFeedback method
Mock examination 2 hours 1-9 Exam grade and written feedback on ELE

Summative assessment (% of credit)

CourseworkWritten examsPractical exams
15850

Details of summative assessment

Form of assessment% of creditSize of the assessment (eg length / duration)ILOs assessedFeedback method
Examination852 hours1-9Exam grade and written feedback on ELE
Group Coursework153,000 Words1-10Feedback on ELE

Details of re-assessment (where required by referral or deferral)

Original form of assessmentForm of re-assessmentILOs re-assessedTimescale for re-assessment
Group coursework (15%) and Written examination (85%)Written examination (100%) 2 hours1-9Aug

Syllabus plan

• Equity valuation approaches and models, reconciliation of models, and contemporary methods of operationalising the FCF model
• A guest investment practitioner’s talk on corporate valuation or some other flexible arrangement
• Forecasting and business environment analysis including the Ohlson model and forward earnings growth model
• On the implied cost of equity capital
• Links between fundamental valuation model and value multiples
• Equity investment informed from firm’s fundamental analysis
• Revision and mock exam

Indicative learning resources - Basic reading

The module is mainly informed by academic research. A large part is based on the module instructor’s own research in the last twenty years. 

Supplementary readings:

  • Koller, T., Goedhart, M., Wessels, D., Schwimmer, B., & Manoury, F. (2015). Valuation: measuring and managing the value of companies (6th ed.). Hoboken, N.J.: John Wiley & Sons.
  • Palepu, K., Healy, P. Bernard, V. & Peek, E. (2015). Business analysis and valuation: IFRS edition (4th ed.). Andover: Cengage Learning.

Plus supplementary journal articles as directed

Other supplementary reading:

  • Gregory, A. (2001). Strategic valuation of companies (2nd ed.). London: Financial Times/Prentice Hall.
  • Lundholme, R., & Sloan, R. (2013). Equity valuation and analysis (3rd ed.). New York: McGraw-Hill Irwin.
  • Penman, S. (2012). Financial statement analysis and security valuation (5th ed.). New York: McGraw Hill.

Module has an active ELE page?

Yes

Origin date

01/09/2007

Last revision date

20/08/2020