EC371-7-AU-CO:
Economic Analysis of Asset Prices
2019/20
Economics
Colchester Campus
Autumn
Postgraduate: Level 7
Current
Thursday 03 October 2019
Saturday 14 December 2019
20
08 January 2020
Requisites for this module
(none)
(none)
(none)
(none)
(none)
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.
The module seeks 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 EC371 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.
The module is optional for MA Economics students only
2 lectures and one (optional) class per week in one term
- 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) 'The capital asset pricing model', in The economics of financial markets, Cambridge: Cambridge University Press., pp.143-165
- Bailey, Roy E. (2005) The economics of financial markets, Cambridge: Cambridge University Press.
- Roy E. Bailey. (2005) 'Factor models and the arbitrage pricing theory', in The economics of financial markets, Cambridge: Cambridge University Press., pp.183-199
- 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) 'Options markets II: price determination', in The economics of financial markets, Cambridge: Cambridge University Press., pp.467-493
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
The coursework takes the form of a test during the term.
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 rbailey@essex.ac.uk
No
No
No
Prof Aditya Goenka
The University of Birmingham
Chair
Available via Moodle
Of 38 hours, 30 (78.9%) hours available to students:
8 hours not recorded due to service coverage or fault;
0 hours not recorded due to opt-out by lecturer(s).
Economics
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