EC988: Investment and the Financial System

Introduction

Principal Aims

This module is designed to provide an overview of the financial markets. It will explain the integration of firms’ investment decisions with financial instruments. Key topics include investment related to the bond and stock market, capital asset pricing, consumption-based asset pricing models, and systemic risk.

Students will gain an understanding of the relationship between investment and financial markets. They will learn how the stock market affects investment decisions, how equity and derivative instruments work in financial markets, and why systemic risk is important in financial markets. They will also study models based on capital and consumption-based asset pricing.

Topics in this module include the interplay between the bond market and yield curves, stock market bubbles, and systemic risk in financial markets, firms' investment decisions, the microeconomic foundations of the Capital Asset Pricing Model (CAPM), and consumption-based asset pricing models.

Principal Learning Outcomes

Subject Knowledge and Understanding:...understand changes in financial markets & financial crises. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study. The summative assessment methods that measure the achievement of this learning outcome are: Examination.

Subject Knowledge and Understanding:...understand debt and equity securities, firms’ investment decisions analysis. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study. The summative assessment methods that measure the achievement of this learning outcome are: Examination.

Subject Knowledge and Understanding:...demonstrate a comprehensive understanding of recent advances in financial markets. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study. The summative assessment methods that measure the achievement of this learning outcome are: Examination.

Cognitive skills:...critically evaluate selected empirical techniques which form the basis of recent approaches to understanding the behaviour of firms in financial markets. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study The summative assessment methods that measure the achievement of this learning outcome are: Examination"

Subject Specific and Professional Skills:...appraise and synthesise the relevant literature explaining how theories have been tested and the results obtained. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study. The summative assessment methods that measure the achievement of this learning outcome are: Examination.

Syllabus

Context

Optional Module

L1P6 - Year 1, L1P7 - Year 1

Pre or Co-requisites

Basic knowledge of calculus and econometrics.

Assessment

Assessment Method

In-person Examination (100%)

Coursework Details

In-person Examination (100%)

Exam Timing

May

Exam Rubric

Time Allowed: 2 Hours

Read all instructions carefully - and read through the entire paper at least once before you start entering your answers.

There are THREE questions in this paper. You must answer TWO questions (50 marks each).

Answer each whole question in a separate booklet.

Approved scientific (non-graphical) pocket calculators are allowed.

You should not submit answers to more than the required number of questions. If you do, we will mark the questions in the order that they appear, up to the required number of questions in each section.

Previous exam papers can be found in the University’s past papers archive. Please note that previous exam papers may not have operated under the same exam rubric or assessment weightings as those for the current academic year. The content of past papers may also be different.

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