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Investment Analysis A

Module Code: ECU33051 (old code EC3150)

Module Title: Investment Analysis A

  • ECTS Weighting: 5
  • Semester/Term Taught: Semester 1
  • Contact Hours: 22 hours of lectures and 4 hours of tutorials
  • Module Personnel: Lecturer - Professor Davide Romelli

*Please note that this outline has not been finalised and is subject to change.

Module Learning Aims

This module analyses, at both a practical and theoretical level, the process of investment in financial markets.

The first half of the module explores how financial markets operate and how securities are bought and sold. The trade-off between higher average returns and more `risky' pay-offs is then discussed. The problem of determining an optimal investment strategy, given beliefs about the probability distribution of returns, is also addressed. Other issues considered include the informational efficiency of financial markets and systematic pricing failures, the role of behavioural biases, and the relative usefulness of fundamental analysis and technical analysis in predicting price movements.

Students are also required to complete projects involving the collection and analysis of financial data.

Module Content

  • Introduction and Diversification
  • The Efficient Frontier and The Single Index Model
  • Capital Asset Pricing Model (CAPM)
  • Zero-Beta CAPM
  • Empirical Tests of CAPM
  • Arbitrage Pricing Theory (APT)
  • Debt and Equity, Efficient Market Hypothesis (EMH) and Technical Analysis
  • Behavioural Finance

Learning Outcomes

Upon successful completion, students will be able to:

  • Explain the theory underlying portfolio theory
  • Explain and critique the Capital Asset Pricing Model (CAPM)
  • Contrast the Arbitrage Pricing Theory and Capital Asset Pricing Model
  • Explain the Efficient Market Hypothesis and discuss the issues of behavioural finance

Recommended Reading List

Corporate Finance, Hillier, D. J., Ross, S. A., Westerfield, R. W., Jaffe, J., and Jordan, B. D., 3rd edition, London: McGraw-Hill/Irwin, 2016. (Earlier editions will also suffice).

Investments, Bodie, Z., Kane, A., and Marcus, A. J., 10th edition, London: McGraw-Hill/Irwin, 2016.

Module Pre Requisite

ECU22011 & ECU22012 Intermediate Economics and ECU22031 & ECU22032 Mathematical and Statistical Methods (or equivalent)

This module does not assume previous knowledge of financial economics and for the most part the level of mathematics and statistics does not extend beyond SF Maths and Stats. Students should note, however, that this is an analytical economics module that makes constant use of tools derived from mathematical and statistical concepts.

Assessment Details

Project worth 70% of module marks, online test worth 30% of module marks. Late submissions that have not been agreed in writing beforehand will be penalised 10% per day.

Module Website

Blackboard