Tuesday, 28 July 2009

What the ambitious P4 student should have on the shelf

Many of you have asked.....

There are many excellent books out there that can support the study manuals authorised by the ACCA. The two authorised manuals are provided by BPP and Kaplan. They are good and you will need them to guide you through the subject.

The problem with recommending texts is that none are a perfect fit. However, with some careful cross referencing of chapters with those in the study manuals the following provide excellent sources to help you develop to the level you need:

Either:

Pike and Neale (2005) Corporate Finance and Investment FT/Prentice Hall. This book covers a wide range of the P4 syllabus but is a bit thin on acquisitions and valuation. But it is a great book for just getting to grips with it all.

or:

Ryan (2007) Corporate Finance and Valuation, Cengage. (Well you didn't think I wouldn't give it a plug)

Both of the above will help build your finance base above F9. My book is pitched at a slightly higher level than Pike and Neale which is a strong undergraduate level text. If you have used Brealey and Myers 'Principles of Corporate Finance' then this too is a great book but does have a US edge to it.

Cuthbertson and Nitzsche (2009) Financial Engineering - derivatives and risk management, Wiley. This covers most of the treasury work that is required at P4 and will serve well if you decide to go on and do a finance oriented MSc or MBA, or indeed the CFA.

For those who want to get into derivatives Whaley's Derivatives (Wiley) is excellent. For valuation Damodaran's 'Investment Valuation' (Wiley) and Koller, Goedhart and Wessels 'Valuation' (McKinsey) are very solid texts.

For more general reading on the operation of financial markets I recommend Fabozzi, Modigliani and Jones 'Foundations of Financial Markets and Institutions' (Pearson).

On top of that you need to become an avid reader of the FT, Student Accountant and www.CFO.com.

The other route to success is to find a great teacher who doesn't kid you that you can pass in three months. You can't - it takes a year to get to P4.

29 comments:

rohit said...

thank you for recmm. books it was me hu was askin for book .

n u r right it will take one year prep. for cracking P4 i prepared for 1 yr.

thanks i wil buy ur book as i would like to go into M&A

i hope its up to the mark

regards,
rohit

Anonymous said...

i like steve lumbys book. cool and easy to understand.

any comment bob?

Professor Bob Ryan said...

Steve Lumby's book is very good and can provide a good bridge from F9 to P4 if you are a bit shaky on the basics. His material on portfolio theory, CAPM and so on is pretty good. Its very well written too. Key thing is though if you have used the book and like it, stick with it for the core of your learning and then go into the more specialised texts to get the level.

Veena said...

Hi Bob,

Gosh - can't believe it - I have passed P4!!!

Just wanted to say a thank you for setting this challenging paper, which has made the experience of passing ACCA more exciting!

Kind regards,
Veena

Anonymous said...

i failed, i study damodaran text.. is it diff than ACCA format.. wonder why i failed... btw i know methods beyond wut ACCA required from reading this text.. Prof Bob, can you give me an opinion?

Anonymous said...

i read the BPP text for 1 and half year. your exam is far beyond the text this time. I could just burn them directly! it is unfair...I can attempt a CFA exam up to your expectation ,why should I stay as an accountant?

Anonymous said...

Could you write a blog or article in student account on the Duration Method? I read many textbook except your book, FTC and BPP, none have mention this method.. I try follow last year dec08 question but i still not sure i'm correct or not and i failed.. Please... TQ

Anonymous said...

one more prof,

regarding the foward swap question,
can you put the short note on swap method in this blog.. Coz i have study many text nad they have many diff methods on Swap.. Plz show me the methods that relevant in ACCA examination and its definition..

TQ

Anonymous said...

i think you marked is biased towards your recommended books... Prove me if i am wrong.

Professor Bob Ryan said...

Congratulations to all of you that have passed (ee this and other threads) and commiserations to those who have failed. I will look at the topics you suggest for the blog so keep on passing by to see what's new.

Anonymous said...

I go thru every comment in this thread, they all stated that derivative and risk management method is different in others books... is it true?

I have one book on derivatives, the title is
Derivatives Demystified
A Step-by-Step Guide to Forwards, Futures,
Swaps and Options
Andrew M. Chisholm
Could you take a look in this book, is it relevant to ACCA examination in treasury part?

Professor Bob Ryan said...

I have a copy of Andrew's book on my shelves and it is very good - you shouldn't go to far wrong with any of it. Essentially, if you read, absorbed and could apply the material in Andrew's book you would find P4 (teasury) straightforward.

Professor Bob Ryan said...

On this issue of books I was amused to see the suggestion that 'i think you marked is biased towards your recommended books... Prove me if i am wrong.' Like all professional examinations (lawyers, accountants) my markers mark off a model answer. Have a look at the model answers for this and other P4 papers and see if you can spot any favourites. What is true is that you do need to read around the subject and not rely wholly on the authorized study texts. Compare, for example Chisholm's book which is a straightforward and basic treatment of the subject of derivatives and treasury with what is in the study guides. That section of the syllabus on its own requires a whole book (at least) - so where does that leave the study guide authors? Three or four chapters for an overview - not the level of expertise that the syllabus demands. As I have said before - you need the study guides as a route map through the dessert. You need other books to teach you how to survive.

Anonymous said...

"The other route to success is to find a great teacher who doesn't kid you that you can pass in three months. You can't - it takes a year to get to P4. "

i passed P4 first time bob, i only studied the kaplan book for 2 months, and forgot all my F9 paper stuff, because got it exempted from degree.

Anonymous said...

Sir,

Does the books you recommend include examples and questions for each relevant topic?
I tend to learn quicker with the aids of examples and questions.

Regards,
Cloud

Anonymous said...

Prof Bob,

I also like to hear from you regarding the Duration Method, which is not covered by many text..

Anonymous said...

Prof,

Is the currency future important?

registoni said...

i just found this book on the shelf:
Lecturing Birds on Flying: Can Mathematical Theories Destroy the Financial Markets? by Pablo Triana. Just wondering if you had a chance to read it and what is your opinion on it, prof Bob?

Anonymous said...

Ok, i just finish one of your recommended text and others relevant subject on treasury,

my question is, in future exam, do you included the sophisticated model of option that is not straightforward?

I noticed that u have done that before on previous exam which u have incorporated time value into swap, and that's intereting, how bout my question above?

Anonymous said...

u r not including weather derivatives rite into the exam?

Anonymous said...

Hi Prof Bob and all,

Could any one help me get the PI for last P4 capital rationing . I not sure how the answers were obtained for Profiatbility Index.

Thanks

registoni said...

After reading couple of books and listening to some economists, I am curious to ask a question to Prof Bob Ryan,
What is your stance on EFFICIENT MARKET HYPOTHESIS and BEHAVIORAL FINANCE?

Professor Bob Ryan said...

The EMH was devised by Eugene Fama as a testable hypothesis. It has been tested over the last 50 years in a wide variety of ways and in a wide variety of markets. Overall it has performed remarkably well and although plenty of counter instances have been found they have been insufficiently robust to enable predictions about future inefficiencies to be made. When a trader or a student says to me they know of an inefficiency I say good, don't tell anybody, make loads of money. Generally they don't. I have also noted that when talking to traders they all say they are above average traders. Now, I knw enough about an average to know that not everyone who trades can be above it. As far as behavioral research is concerned that too is interesting but many of the discovered effects have been successfully challenged. Mark Rubinstein's 'Rational Markets: Yes or No? The Affirmative Case' (pick it up through a Google search, provides a comprehensive critique of that research.

registoni said...

thanks for your comments on EMH, prof BOB.
I was just under impression after reading the recent book The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox (published by HarperBusiness in Jun 2009) which is clearly advocates the opposite view on this.
I will try to get Rubenstein's paper, although I might think that it is being written in pre-crisis period (2000 dot.com crash and current fin.crysis) that author would rephrase his paper's title under current condition:'Rational Markets: Yes or No? The Negative Case'. Or maybe not.
Anyway your hint of reading more books on finance for P4 exam did really make me enjoy the subject, so many interesting books, never thought of those financial theories and practices of being so interesting for me.

Professor Bob Ryan said...

I performed an interesting test of the EMH in its week form today. Using Rolls Royce shares as a case study we tested its option pricing using a historical volatility of a little over 29%. At the money and near the money calls are priced exactly by the BS model. This model requires that stocks follow a generalised brownian motion - that is a random walk about a rising trend generating a lognormal distribution of prices. The close agreement of market to model suggests that the model's assumptions are validated and that, indeed, the market follows a random walk as predicted if the weak form of the EMH holds. In some respects I think the market as done an excellent job over the last few months - indeed, one couold argue that it has been the absence of an efficient market in banks assets (that are mostly traded OTC) that contributed to the crisis.

Thanks for the reference and enjoy your finance.

vinnie said...

Dear Bob,
I have your book and deem it very useful. However, I think there is an error in the equation on page 503...If you plug these numbers in to calculate the settlement you get a different figure to that in the book. Can you let me know if it is an error?

ALI said...

hi Bob, i just wanted to ask u whether or not u are going to set the paper for the june 2010 exam sitting.

thanks

ALi

sam said...

Bob please tell me the name of steve lumby book as i want to prepare for p4

Professor Bob Ryan said...

Hi Sam - there are two but the better one has just come into a new edition: Corporate Finance in Theory and Practice (PHI). The amazon link is http://www.amazon.co.uk/Corporate-Finance-Steve-Lumby/dp/1408079895/ref=sr_1_1?ie=UTF8&qid=1448370820&sr=8-1&keywords=steve+lumby,

The best of luck with P4.