EC371-7-AU-CO:
Economic Analysis of Asset Prices

The details
2024/25
Economics
Colchester Campus
Autumn
Postgraduate: Level 7
Current
Thursday 03 October 2024
Friday 13 December 2024
20
08 September 2023

 

Requisites for this module
(none)
(none)
(none)
(none)

 

(none)

Key module for

MA L11312 Financial Economics

Module description

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.

Module aims

The aims of this module are:



  • To understand the impact of uncertainty of asset prices, with the implications for the efficiency of capital markets.

  • To explore 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.

Module learning outcomes

By the end of this module, students will be expected to be able to:



  1. Acquire an appreciation of how economic theories help to account for the determination of asset prices.

  2. 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.


Transferable Skills


This module 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.

Module information

While the topics covered are the same for both EC371-6-AU and EC371-7-AU, the differences between the two levels are that level 6 students are expected to have a background in undergraduate economic principles (especially microeconomic theory), while level 7 students would have completed an undergraduate degree (BA or BSc equivalent) but not necessarily with an emphasis on economic principles. This being so, level 6 students are expected to extend their knowledge of economic analysis in the context of financial markets, while level 7 students learn more about how financial markets can be analysed from the perspective of economic theory. (This is how the ‘learning outcomes’ differ in a nuanced way between the two levels.)


It is thus appropriate that the teaching and readings are the same for both groups: what differs is the manner in which students approach and respond to these resources. In this context for instance, students at level 6 are expected to display the skills acquired from their second year of study in the Department of Economics. Level 7 students might demonstrate a less formal knowledge of economics but would bring to their studies a broader knowledge of degree level work.


In order to enable students at each level to demonstrate their knowledge to their best advantage, the assessments (mid-term test and final examination questions) differ, not in the subject matter covered, but instead in the ways in which logical reasoning and economic analysis are applied to answer the questions. In recognising moreover that students are diverse in their range of abilities (at any level), the EC371 assessments provide opportunities for all students to express themselves to their best advantage. The assessment of the differences requires the exercise of academic judgment, of which the examiners are aware and take into account.

Learning and teaching methods

The module will be delivered via:

  • 2 lectures per week
  • One (optional) class per week

in one term.

Bibliography

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
Exam  Main exam: In-Person, Open Book, 120 minutes during Summer (Main Period) 
Exam  Reassessment Main exam: In-Person, Open Book, 120 minutes during September (Reassessment Period) 

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

Coursework Exam
30% 70%

Reassessment

Coursework Exam
0% 100%
Module supervisor and teaching staff
Mr Roy Bailey, email: rbailey@essex.ac.uk.
Lectures: Mr Roy Bailey / Classes: Mr Mohd El Diri
For further information, send an email message to fineco@essex.ac.uk

 

Availability
No
No
No

External examiner

Mr Pedro David Matos Serodio
Resources
Available via Moodle
Of 32 hours, 30 (93.8%) hours available to students:
0 hours not recorded due to service coverage or fault;
2 hours not recorded due to opt-out by lecturer(s), module, or event type.

 

Further information
Economics

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