The Course

How does one best determine ‘value’ in stockmarkets? What forces act to produce the regular material deviations from even the best estimates of such value? These are the key questions that this course seeks to answer. Although utilising historical examples, the course is an educational tool for active investors. So it is a practical, and not just a chronological, history.

In the first module, Andrew Smithers and Stephen Wright (authors of Valuing Wall Street) look at 200 years of data on equity and bond valuations to find which equity valuation criteria work in practice. They find two that – contrary to the teachings of efficient market hypothesis (EMH) – are predictive of future equity market returns. Having established the best guide to fair value for equities, the rest of the course focuses on the forces that cause equities to trade away from fair value.

The two most usually mentioned in this regard are liquidity and psychology. John Greenwood teaches the unit on liquidity. John explores the mechanisms through which money affects financial markets and focus on how, in understanding liquidity trades, one’s understanding of financial markets is enhanced.

And so to psychology: our unit on behavioural finance is taught by Herman Brodie, who runs a consultancy company helping financial services companies implement behavioural techniques. Herman’s long experience as a currency trader and provider of advice to financial institutions has given him unique insights into the practical uses of behavioural finance.

Another factor impacting deviation from fair value is inflationary expectations. Peter Warburton looks at the impact of changes in inflation on bonds, bills, equities and equity sectors in 16 different countries over the past 100 years.

Russell Napier concludes the formal teaching with a lecture on how the key forces driving the mean reversion of equity valuations interact.

On the final day we have three morning lectures from Jon Compton, Edward Chancellor and Russell Napier. Jon Compton lectures on common mistakes in the investment industry (Missing The Obvious: Thirty-Five Years in the Investment Trenches) and Edward Chancellor assesses the role of the credit cycle in investing (The Credit Cycle And Asset Allocation). The morning finishes with Russell Napier utilising the lessons from the course to forecast our financial future (Financial History: The Next Ten Years).

Download a typical teaching schedule.