EC371-6-AU-CO:
Economic Analysis of Asset Prices
2020/21
Economics
Colchester Campus
Autumn
Undergraduate: Level 6
Current
Thursday 08 October 2020
Friday 18 December 2020
15
16 January 2020
Requisites for this module
(EC115 or BE300 or IA156 or MA101) and EC202
(none)
(none)
(none)
(none)
BA L100SK Economics,
BSC L101SK Economics,
BA 5A84 Financial Economics (Including Placement Year),
BA L111 Financial Economics,
BA L118 Financial Economics (Including Foundation Year),
BA L195 Financial Economics (Including Year Abroad),
BSC 0Q64 Financial Economics (Including Placement Year),
BSC L114 Financial Economics,
BSC L117 Financial Economics (Including Foundation Year),
BSC L194 Financial Economics (Including Year Abroad),
MECNL131 Financial Economics,
MECNLB31 Financial Economics (Including Placement Year),
MECNLB32 Financial Economics (Including Year Abroad),
BA L147 Financial Economics and Accounting (Including Placement Year),
BA L148 Financial Economics and Accounting,
BA L149 Financial Economics and Accounting (Including Year Abroad),
BA LX14 Financial Economics and Accounting (Including Foundation Year)
The module begins with an overview of capital markets and explores limits to the predictability of asset price changes, together with concepts of asset market efficiency. Portfolio theories of asset selection under uncertainty are reviewed, with emphasis on mean-variance analysis. Mean-variance analysis is then adapted to construct the Capital Asset Pricing Model (CAPM). Concepts of arbitrage are examined, and applied to introduce Arbitrage Pricing Theory (APT) in theory and practice.
The module goes on to explore distinctive features of markets for bonds and fixed interest securities. The two main classes of derivatives' markets – for futures and options contracts – are then examined with a view to applications involving the underlying assets in each case.
This module aims to understand the impact of uncertainty of asset prices, with the implications for the efficiency of capital markets.
The module explores how it is possible to predict assets’ expected rates of return relative to the assets’ risks, going on to examine the relationships between futures and options prices and their underlying assets.
It also aims to contribute to the development of useful skills in the form of
1. problem-solving, via the analysis of formal models in finance;
2. communication and literacy in the analysis of issues involving financial markets.
The module further supports employability skills in the form of:
1. awareness of the operation of financial markets in advanced economies;
2. clear, concise and well organised professional written work;
3. personal time management, target-setting to achieve the timely completion of exercises and tests.
In completing the module, students will acquire an appreciation of how economic theories help to account for the determination of asset prices. They will learn how to apply analytical reasoning to problems in asset pricing; to build simple models of asset markets based on those studied in the course; and to interpret the mathematics of these models in economic terms.
This module is compulsory for Year 3 Students on BA in Financial Economics and BSc in Financial Economics.
2 lectures and one (optional) class per week in one term
- Roy E. Bailey. (2005) 'The capital asset pricing model', in The economics of financial markets, Cambridge: Cambridge University Press., pp.143-165
- Roy E. Bailey. (2005) 'Options markets II: price determination', in The economics of financial markets, Cambridge: Cambridge University Press., pp.467-493
- Roy E. Bailey. (2005) 'Asset markets and asset prices', in The economics of financial markets, Cambridge: Cambridge University Press., pp.1-32
- Roy E. Bailey. (2005) 'Options markets I: fundamentals', in The economics of financial markets, Cambridge: Cambridge University Press., pp.438-466
- Roy E. Bailey. (2005) 'Predictability of prices and market efficiency', in The economics of financial markets, Cambridge: Cambridge University Press., pp.56-82
- Roy E. Bailey. (2005) 'Factor models and the arbitrage pricing theory', in The economics of financial markets, Cambridge: Cambridge University Press., pp.183-199
The above list is indicative of the essential reading for the course. The library makes provision for all reading list items, with digital provision where possible, and these resources are shared between students. Further reading can be obtained from this module's reading list.
Assessment items, weightings and deadlines
| Coursework / exam |
Description |
Deadline |
Coursework weighting |
| Coursework |
EC371 Mid-Term Test |
|
|
| Exam |
Main exam: 180 minutes during Summer (Main Period)
|
Additional coursework information
Feedback, including a mark, will be provided for each piece of submitted work (assignment essays) via a feedback sheet. Students are also encouraged to discuss draft assignments prior to submission and also marked work following assessment. Feedback is also provided in weekly office hours as well as towards the end of each lecture, when students answer a “quick question” based on the lecture material. A class is held each week to answer exercises on the previous week’s lecture material. Feedback is then provided with answer guidelines for quick questions and exercises posted for students’ consultation in the EC371 Moodle site. A multiple choice test held during the term enables students to obtain feedback on their progress in gaining a grasp of basic EC371 concepts. Before the final examination feedback is provided on students’ answers to previous years’ examination questions and in revision sessions.
Exam format definitions
- Remote, open book: Your exam will take place remotely via an online learning platform. You may refer to any physical or electronic materials during the exam.
- In-person, open book: Your exam will take place on campus under invigilation. You may refer to any physical materials such as paper study notes or a textbook during the exam. Electronic devices may not be used in the exam.
- In-person, open book (restricted): The exam will take place on campus under invigilation. You may refer only to specific physical materials such as a named textbook during the exam. Permitted materials will be specified by your department. Electronic devices may not be used in the exam.
- In-person, closed book: The exam will take place on campus under invigilation. You may not refer to any physical materials or electronic devices during the exam. There may be times when a paper dictionary,
for example, may be permitted in an otherwise closed book exam. Any exceptions will be specified by your department.
Your department will provide further guidance before your exams.
Overall assessment
Reassessment
Module supervisor and teaching staff
Mr Roy Bailey, email: rbailey@essex.ac.uk.
Lectures & classes: Roy Bailey
For further information, send an email message to ueco@essex.ac.uk.
Yes
Yes
No
Mr Pedro David Matos Serodio
Available via Moodle
Of 300 hours, 0 (0%) hours available to students:
300 hours not recorded due to service coverage or fault;
0 hours not recorded due to opt-out by lecturer(s).
Economics
Disclaimer: The University makes every effort to ensure that this information on its Module Directory is accurate and up-to-date. Exceptionally it can
be necessary to make changes, for example to programmes, modules, facilities or fees. Examples of such reasons might include a change of law or regulatory requirements,
industrial action, lack of demand, departure of key personnel, change in government policy, or withdrawal/reduction of funding. Changes to modules may for example consist
of variations to the content and method of delivery or assessment of modules and other services, to discontinue modules and other services and to merge or combine modules.
The University will endeavour to keep such changes to a minimum, and will also keep students informed appropriately by updating our programme specifications and module directory.
The full Procedures, Rules and Regulations of the University governing how it operates are set out in the Charter, Statutes and Ordinances and in the University Regulations, Policy and Procedures.