IDM082-The Economics of Financial Markets

Module Provider: APD
Number of credits: 10 [5 ECTS credits]
Level:7
Terms in which taught: Spring term module
Pre-requisites:
Non-modular pre-requisites:
Co-requisites:
Modules excluded: ECM132 The Economics of Financial Markets
Current from: 2022/3

Module Convenor: Mr Alex Chen
Email: j.a.chen@reading.ac.uk

Type of module:

Summary module description:

This module is an introductory course that teaches the fundamentals of financial markets and institutions. The course begins with an introduction to how consumers and producers make decisions in a perfect capital market under certainty. Next, it introduces the theory of choice under risk. In the next section of the course, students will learn how asset prices are determined and how investors make portfolio allocation decisions. In the final section, we will turn our attention to financial institutions and the recent developments in the financial markets.

Aims:

The primary goal of this module is to provide a solid foundation of economic theories and analysis, focusing on their applications in decision making in the financial markets.

Assessable learning outcomes:

By the end of this course, students should be able to:

• Understand how (investment) decisions are made under certainty and under risk


• Understand how investors form their investment portfolios and explain/critique the most prominent theories explaining such decisions.


• Understand why financial institutions/markets exist, their role in promoting economic growth, and recent developments in the global financial markets.

Additional outcomes:

Students will learn skills required to do relevant research, write reports, critically discuss journal articles, and apply theoretical knowledge to real world situations. 

Outline content:

Main topics may include inter-temporal optimisation of consumption, investment decision given certainty, introduction to expected utility theory, mean-variance portfolio theory, capital asset pricing model, introduction to financial markets and overview of financial institutions.

Brief description of teaching and learning methods:

Detailed guidance on the topics covered will be provided in the 10 x 2 hours weekly lectures (and 1 x 1-hour revision class), together with comprehensive handouts covering the material discussed, examples, exercises and solutions to facilitate understanding of key concepts. Students may be required to do exercises corresponding to each topic, to read a significant amount of journal articles, and to undertake research using the library, internet, etc. 

Contact hours:

	Autumn	Spring	Summer
Lectures		21
Guided independent study:		79
Total hours by term	0	100	0
Total hours for module	100

Summative Assessment Methods:

Method	Percentage
Written assignment including essay	50
Class test administered by School	50

Summative assessment- Examinations:

Summative assessment- Coursework and in-class tests:

One mid-class test (50%) and one written assignment (50%).

Formative assessment methods:

Open discussion, worked examples, problem solving based class activities during the lectures.

Penalties for late submission:

The below information applies to students on taught programmes except those on Postgraduate Flexible programmes. Penalties for late submission, and the associated procedures, which apply to Postgraduate Flexible programmes are specified in the policy £Penalties for late submission for Postgraduate Flexible programmes£, which can be found here: https://www.reading.ac.uk/cqsd/-/media/project/functions/cqsd/documents/cqsd-old-site-documents/penaltiesforlatesubmissionpgflexible.pdf
The Support Centres will apply the following penalties for work submitted late:

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of five working days;
• where the piece of work is submitted more than five working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

The University policy statement on penalties for late submission can be found at: https://www.reading.ac.uk/cqsd/-/media/project/functions/cqsd/documents/cqsd-old-site-documents/penaltiesforlatesubmission.pdf
You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Assessment requirements for a pass:

A minimum weighted average mark of coursework and examination of 50%. 

Reassessment arrangements:

Re-examination for all modules takes place in August/September of the same year. Re-assessment will be by way of a single alternative assignment which will account for 100% of the module mark.

Additional Costs (specified where applicable):

1) Required textbook (Recommended, but not a compulsory purchase) is Frank J. Fabozzi, Edwin H. Neave and Guofu Zhou, Financial Economics, John Wiley and Sons, 2012. Hard copies are available in the library.

2) Specialist equipment or materials:  None

3) Specialist clothing, footwear or headgear:  None

4) Printing and binding:  None

5) Computers and devices with a particular specification:  None

6) Travel, accommodation and subsistence:  None

Last updated: 10 October 2022