Economics of Financial Markets
Module Code: EC4051
Module Title: Economics of Financial Markets
- ECTS Weighting: 15
- Semester/Term Taught: Michaelmas + Hilary Term
- Contact Hours: 44 hours of lectures and 10 hours of tutorials
- Module Personnel: Lecturer - Professor Andrew Somerville / Lecturer - Professor Agustin Benetrix
Learning Outcomes
On successful completion of this module, you will be able to:
- Synthesize a broad range of topics in modern finance
- Apply statistical techniques to judge the empirical performance of economic theories of financial markets
Module Learning Aims
This course is concerned with the pricing of financial assets, and with the pricing and handling of risk, and with the place of the financial markets in the economy as a whole. For example, how might risk-averse investors choose an efficient portfolio of risky investments? Do stock market prices reflect all available information, or are they influenced by irrational waves of sentiment? This course does assume some previous knowledge of financial economics. For the most part the level of mathematics and statistics does not extend beyond SF Maths and Stats.
Module Content
Module 1: Theory topics include the financial markets and the real economy; the CAPM and the arbitrage pricing theory; derivatives; international finance; behavioural finance.
Module 2: Empirical issues in the economics of securities markets. The first part of the module will focus on statistical techniques and the predictability of asset returns. We will also look in details at the empirical performance of the CAPM and the APT, and discuss the modelling and testing of rational bubbles. The second part of the module will examine issues in international finance, covering such topics as covered and uncovered interest parities, the unbiasedness of the forward rate, and risk premia.
Recommended Reading List
Michaelmas Term: Elton, E.J. and M.J. Gruber, (2010-11), Modern Portfolio Theory and Investment Analysis (8th ed.). (Chichester: Wiley); Cuthbertson, K. and D. Nitzsche, (2004), Quantitative Financial Economics (2nd ed.). (Chichester: Wiley.)
Hilary Term: Wooldridge, J.M., (2002), Introductory Econometrics: A Modern Approach (2nd ed.), (South-Western College Publishing); Cuthbertson, K. and Nitzsche, D. (2004), Quantitative Financial Economics (2nd ed.), (Chichester: Wiley); Elton, E.J. and Gruber, M.J. (2010), Modern Portfolio Theory and Investment Analysis (8th ed.), (Chichester: Wiley); Hull, J. (2012), Options, Futures and other Derivatives (8th ed.), (Prentice Hall).
Module Pre Requisite
EC3010 or EC3050; and EC2040
Assessment Details
5% of the overall grade is based on an essay due in week 9 of Michaelmas Term. 20% of the overall grade is based on a project undertaken in Hilary Term. The remaining 75% of the module grade is based on the annual exam.
Module Website
Michaelmas Term: http://www.tcd.ie/Economics/staff/rsomrvll/
Hilary Term: Blackboard