MUTIS Finance Conference 2014

1

In preparation, use your mobile phone

visit www.rwpoll.com Session ID: manc (lower/upper case) Don’t enter details, just click Continue Feel Free to Feedback to me on TP or

on twitter during this talk.

Paul MiddleditchLecturer in Macroeconomics@DrMiddleditch

2

Linkedin Rankings for InvestmentUniversity of Manchester

Ranks seventh on Linkedin in the UK for employment in the area of investment banking.

151,800 students & alumni on Linkedin (440 personally connected)

https://www.linkedin.com/edu/rankings/gb/undergraduate-investment-banking

3

What contributes towards the success of our graduates?

The existence of MUTIS is no doubt significant

Manchester Business School

Award winning careers office

The Economics Department………..?

What is your impression of the current value of the FTSE 250?

1. 2. 3. 4. 5.

33%

10%

20%17%

20%

1. Strongly undervalued2. Undervalued.3. About right.4. Overvalued.5. Strongly overvalued.

ECON30611– 3rd Year UG Macroeconomics IIIA – approx 300 students

Twitter: @PaulM_Mac3A14

Macroeconomics IIIA

Learn the importance of expectations in the realistic modelling of the economy.

Concepts of Rational Expectation and Adaptive Expectations

Derive the New Keynesian Philips Curve (NKPC) from first principles:

What about when we disaggregate?

Macroeconomics IIIA

The concept that both market fundamentals ‘and’ expectations drive prices can be dis-aggregated.

The NKPC can be manipulated to describe the disaggregate or the sectoral level, such as the finance sector:

Richard Evans – The Telegraph 25th Oct

Stock Market Value:

The market PE ratio currently around 15

Cyclically adjusted PE (CAPE) currently 14 (11 in 2009)

Dividend Yield currently 4% (Highest for 13 years)

All measures signal ‘BUY’ but only reflect past information.

Legacies, Clouds and Uncertainties – IMF World Outloook (Global Growth – 3.3% 2014)

What is your impression of the current value of the FTSE 250?

1. 2. 3. 4. 5.

20% 20%

13%

30%

17%

1. Strongly undervalued2. Undervalued.3. About right.4. Overvalued.5. Strongly overvalued.

What is your impression of the current value of the FTSE 250?

33%

10%

20%

17%

20%

20%

20%

17%

30%

13%

Strongly undervalued

Undervalued.

About right.

Overvalued.

Strongly overvalued.

First Slide Second Slide

11

Conclusion....Traditional measures of stock market and investment

vehicles value tend to be backward looking.Current prices already contain information about the

future so measures of value should also. Including policy announcements and economic outlook

could provide better indicators for the future value of stocks, forex, bonds and financial vehicles generally.

Finally, you can also view the course taught in Economics at Manchester over the web to see this in practice:

@PaulM_Mac3A14