ACCT421

Analytics for Value Investing

Preliminary Course Outline (subject to change)
Term 1, AY2018-19

This is a tentative course outline. Students who are keen to know more about this course prior to
BOSS bidding may contact the instructor for further details. A detailed course outline and lesson
plan will be posted on eLearn for all enrolled students closer to the start of the term.

Instructor

Dr Andrew LEE Phone: +65 6828-0612

Associate Professor of Accounting Practice Email: andrewlee@smu.edu.sg
School of Accountancy

Course Pre-requisites

The official pre-requisites for this course are:

• STAT101 Introductory Statistics or STAT151 Introduction to Statistical Theory; and

• A pass grade in FNCE101 Finance or a grade of ‘A-’ or higher in FNCE103 Finance for Law; and
• ACCT224 Financial Reporting & Analysis or ACCT201 Corporate Reporting & Financial Analysis.

Course Description

This course examines quantitative models and techniques used by securities analysts and investment
managers to identify and interpret patterns in accounting and other financial data for making value-based
fundamental investing decisions. The course will discuss extant research evidence on value investing
strategies over the past decades. Students will then learn to develop their own quantitative strategies, in
the context of a value-based investing framework, to predict financial performance and distress risk of firms
as well as to uncover securities that can potentially generate superior investment returns.

The course will involve writing programming code to analyze large-scale archival data, developing
analytical models, drawing inferences from the statistical results, and back-testing the models for their
predictive power. The advantages and pitfalls of such models—including issues of data selection, and
behavioral and institutional biases—will also be examined. The skills taught would be useful for students
intending to pursue a career in securities analysis, investment management, or financial advisory.

Course Advisory and Objectives

This course is listed as an Accounting Option (AO) under the BAcc program. Although it is designed with
the new Accounting Data & Analytics second major in mind, it is open to all BAcc students.

This course is multi-disciplinary in nature and approach—covering areas that include accounting, computer
programming, corporate finance, financial markets, financial statement analysis, psychology, statistical and
econometric analysis, and equity valuation.

The course will focus on equities as an asset class (and to a lesser extent corporate bonds). The R
statistical programming language will be taught and used in this course. However, the emphasis of this
course is not on programming per se but on statistical analysis and inference of accounting and other
financial data as well as the application of quantitative techniques to fundamental analysis of equity
investments. The course will be delivered on a relatively unstructured format with significant hands-on
emphasis on individual as well as group project assignments.

ACCT421 Analytics for Value Investing (Prof Andrew Lee) Page 1

Students are likely to benefit most from this course if they:

• have a good foundation in accounting, finance and statistics;

• enjoy undertaking hands-on exploratory learning on their own instead of simply trying to seek “model”
solutions from others;
• take a keen interest in, and be well read on, news and developments in the financial world;
• have an aptitude for intellectual inquiry and curiosity.

Beyond just technical competencies, this course also seeks to develop your:

• analytical and communication skills;

• ability to work in groups;
• ability to engage in active learning; and
• awareness of ethical and professional integrity considerations.

Texts and Other Resources

Required and reference texts:

To be advised.

Statistical programming language:

Students will be required to download and install the free open-source version of R (with RStudio) on their
laptops—further instructions will be provided closer to the start of the term. R is a programming language
for statistical computing and graphics. RStudio is an integrated development environment (IDE) for the R
language. R and RStudio can be installed either in a Mac OS or Windows environment.

Journal articles and other resources:

To be advised.

Assessment

To pass this course, a student is required to obtain a total mark of 50% or better. The assessment
components for this course are:

Class Participation 15%

Individual Assignment & Project 25%
Group Assignment & Project 25%
Final Exam 35%
Total 100%

Group Project: Students may form their own groups. Each group should comprise only 3 or 4 students.

Final Exam: The final exam is cumulative and closed-book. However, all statistical formulas and a guide
to key programming codes in R will be provided in the exam.

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Summary Lesson Plan (tentative)

Class sessions are of three-hour duration per week. The following is a tentative summary lesson plan:

Week 1: Statistical models I.

Week 2: Statistical models II.
Week 3: Theory of financial markets.
Week 4: Value investing and Financial statement analysis.
Week 5: Quantitative investing strategies: Empirical evidence I.
Week 6: Quantitative investing strategies: Empirical evidence II.
Week 7: Model development: Hands-on application I.
Week 8: Recess
Week 9: Model development: Hands-on application II.
Week 10: Risk analytics.
Week 11: Group project presentations I.
Week 12: Group project presentations II.
Week 13: Special topics.
Week 14: Study week
Week 15: Final exam

Academic Integrity

All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication of data or
results, facilitation of acts of academic dishonesty by others, gaining unfair advantage, unauthorized
possession of exam questions, or tampering with the academic work of other students) are serious
offences. All work (whether oral or written) submitted for purposes of assessment must be the student’s
own work. Penalties for violation of the policy range from zero marks for the component assessed to
expulsion from the University, depending on the nature of the offense. When in doubt, students should
consult the instructors of the course. Details on the SMU Code of Academic Integrity may be accessed at
http://www.smuscd.org/resources.html.

In addition, SMU CIRCLE values will be rigorously upheld throughout this course – please review the
CIRCLE values at http://www.smu.edu.sg/smu/about/university-information/vision-and-mission.

Accessibility

SMU strives to make learning experiences accessible for all. If you anticipate or experience physical or
academic barriers due to disability, please let me know immediately. You are welcome to also contact the
University’s disability services team if you have questions or concerns about academic provisions:
included@smu.edu.sg.

Please be aware that the accessible tables in our seminar rooms should remain available for students who
require them.

SMU Emergency Preparedness for Teaching and Learning (EPTL)

As part of emergency preparedness, instructors may conduct lessons online via the WebEx platform during
the term, to prepare students for online learning. During an actual emergency, students will be notified to
access the WebEx platform for their online lessons. The class schedule will mirror the current face-to-face
class timetable unless otherwise stated.

Prepared by: Andrew Lee, 9 June 2018

Vetted by: Seow Poh Sun, Associate Dean, 18 June 2018

ACCT421 Analytics for Value Investing (Prof Andrew Lee) Page 3