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Module Title LM Economics of Financial Markets
SchoolBirmingham Business School
Department Birmingham Business School
Module Code 07 27180
Module Lead David Dickinson
Level Masters Level
Credits 10
Semester Semester 2
Pre-requisites
Co-requisites
Restrictions None
Contact Hours
Exclusions
Description The module covers the notions of risk and return in equity markets both in the context of asset pricing, with some consideration given to the management of equity portfolios. The stochastic discount factor approach is employed to present a general theory of the pricing of stocks, bonds, and derivatives and enables the estimations of particular models derived from the general theory. Emphasis will initially be given to the analysis of the time series properties of asset returns, such as fat tails and skewness, and dynamic properties, for example volatility clustering and long memory, will be investigated. The capital asset pricing model (CAPM) and the arbitrage pricing theory (APT) will be used as the foundation of the equilibrium pricing of financial assets. The discount factor, Generalised Methods of Moments and state-space language are considered in the context of the beta, mean-variance, and regression language common in empirical work and earlier theory. The module concludes by looking at the new research area of behavioural finance.
Learning Outcomes By the end of the module students should be able to:
  • Demonstrate a comprehensive understanding of recent advances in financial economics;
  • Critically evaluate selected analytical techniques which form the basis of recent approaches to understanding the behaviour of financial markets;
  • Appraise and synthesise the relevant literature explaining how theories have been tested and the results obtained.
Assessment 27180-01 : Exam : Exam (Centrally Timetabled) - Written Unseen (80%)
27180-02 : Class test : Class Test (20%)
Assessment Methods & Exceptions Assessments:
2 hour written examination (80%)
1 hour test (20%)

Reassessment: 2 hour examination (100%)
Other
Reading List