HOGESCHOOL VAN AMSTERDAM
Stock Valuation
Summary of Lectures + notes
J Parkes
10-12-2014
,Lecture 1: Financial Market: an Introduction
Purpose of the Course:
To provide you with a toolset that enables you to make an investment decision that balances
risk and return. This toolset should be applicable to both personal and professional use.
Contents of the course:
- Stock Market Bubbles
- The Credit Crisis
- Financial statement Analysis
- Technical vs. Fundamental Analysis
- Gordon Growth Model
- Modern Portfolio Theory
- Capital Asset Pricing Model (CAPM)
- Behavioural Finance
- Investment Strategies
There are three Perspectives on Finance
1. Corporate Finance
2. Capital Markets
3. Investments (focus of this course)
- Security Analysis
- Portfolio Theory
- Market Analysis
Factors influencing Investment Decisions
- Risk (preference)
- Return
Market Participants
- Investment Banks
- Commercial Banks
- Credit Unions
- Pension Funds
- (Life) Insurance Companies
- Mutual Funds
- Exchange Traded Funds (ETF)
- Hedge Funds
- Private Equity Companies
, Securities
Implies a financial Asset is tradable. Two main varieties: Equity and Fixed Income
- Equity: represents an ownership claim by Investors (shares in public company)
- Fixed Income: the holder to receive a principal repayment as well as fixed interest by
creditors. (Loans, Bonds, T-Bills)
Derivative Securities
Are derived from either Equity or fixed income securities (options, Futures, CDSs)
Security Analysis
The analysis of the Cash Flows resulting from the security while applying the time value of
money at an appropriate discount rate
Financial Markets
- Spot markets vs Futures markets
- Money markets vs Capital markets
- Primary markets vs Secondary markets
- Private markets vs Public markets
Two types of financial markets
- Open Outcry
- Screen trading
Example of calculating Investment Return
Suppose you buy shares in a Public Company at T0 = 1 January and sell your shares at T1 (31 March)
The following applies:
- P0= €12
- P1 =€16
- Div = €1
What is the Holding Period Return? 1 + (16 – 12)/12 = 0.4167
What is the Annualized Return? 0.4167 x 12/3 = 167%
Stock Valuation
Summary of Lectures + notes
J Parkes
10-12-2014
,Lecture 1: Financial Market: an Introduction
Purpose of the Course:
To provide you with a toolset that enables you to make an investment decision that balances
risk and return. This toolset should be applicable to both personal and professional use.
Contents of the course:
- Stock Market Bubbles
- The Credit Crisis
- Financial statement Analysis
- Technical vs. Fundamental Analysis
- Gordon Growth Model
- Modern Portfolio Theory
- Capital Asset Pricing Model (CAPM)
- Behavioural Finance
- Investment Strategies
There are three Perspectives on Finance
1. Corporate Finance
2. Capital Markets
3. Investments (focus of this course)
- Security Analysis
- Portfolio Theory
- Market Analysis
Factors influencing Investment Decisions
- Risk (preference)
- Return
Market Participants
- Investment Banks
- Commercial Banks
- Credit Unions
- Pension Funds
- (Life) Insurance Companies
- Mutual Funds
- Exchange Traded Funds (ETF)
- Hedge Funds
- Private Equity Companies
, Securities
Implies a financial Asset is tradable. Two main varieties: Equity and Fixed Income
- Equity: represents an ownership claim by Investors (shares in public company)
- Fixed Income: the holder to receive a principal repayment as well as fixed interest by
creditors. (Loans, Bonds, T-Bills)
Derivative Securities
Are derived from either Equity or fixed income securities (options, Futures, CDSs)
Security Analysis
The analysis of the Cash Flows resulting from the security while applying the time value of
money at an appropriate discount rate
Financial Markets
- Spot markets vs Futures markets
- Money markets vs Capital markets
- Primary markets vs Secondary markets
- Private markets vs Public markets
Two types of financial markets
- Open Outcry
- Screen trading
Example of calculating Investment Return
Suppose you buy shares in a Public Company at T0 = 1 January and sell your shares at T1 (31 March)
The following applies:
- P0= €12
- P1 =€16
- Div = €1
What is the Holding Period Return? 1 + (16 – 12)/12 = 0.4167
What is the Annualized Return? 0.4167 x 12/3 = 167%
