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DRPS : Course Catalogue : School of Economics : Economics

Undergraduate Course: Economics of Financial Markets (ECNM10020)

Course Outline
SchoolSchool of Economics CollegeCollege of Humanities and Social Science
Credit level (Normal year taken)SCQF Level 10 (Year 4 Undergraduate) AvailabilityAvailable to all students
SCQF Credits20 ECTS Credits10
SummaryFinancial markets have an important role in the allocation of resources in market economies. This course provides an introduction to how economists analyse behaviour in financial markets. The course builds on material covered in Topics in Microeconomics and Essentials of Econometrics, by extending your understanding of the economic analysis of risk, information, intertemporal choice, basic dynamics, and expectations. Much of the reading for the course is advanced, taken from journal articles and graduate level textbooks. The course is aimed at students who are willing to study challenging material, which is the focus of ongoing research activity.
Course description Economics of Financial markets aims to provide an understanding of the role of financial markets, the behaviour of asset prices and the economic causes and consequences of financial market imperfections. This is achieved through application of economic theory and examination of econometric evidence. The scope of the material (number of models and distinct topics covered) is narrower than average for an honours course. However, students will be expected to have more of a deeper understanding of the models and more of an ability to demonstrate that understanding via formal derivations of results than is typical in an average honours course.
Topics covered include: the present value model and excess volatility; the term structure of interest rates; arbitrage conditions in foreign exchange markets; consumption, portfolio choice and the equity premium; market microstructure.
The course is taught through a programme of lectures and tutorials. Learning-by-doing, through problem solving and discussion of exercise sets, is an important ingredient of the course.
Entry Requirements (not applicable to Visiting Students)
Pre-requisites Students MUST have passed: Topics in Microeconomics (ECNM10070) AND Applications of Econometrics (ECNM10056)
Prohibited Combinations Other requirements If pre-requisites are not met, students must seek permission of the course organiser.
Additional Costs None
Information for Visiting Students
Pre-requisitesVisiting students should usually have an equivalent of at least 4 semester-long Economics courses at grade B or above (or be predicted to obtain this) for entry to this course. This MUST INCLUDE courses in Intermediate Macroeconomics (with calculus); Intermediate Microeconomics (with calculus); Probability and Statistics; and Introductory Econometrics (with coverage of time series econometrics, panel data methods and instrumental variables). If macroeconomics and microeconomics courses are not calculus-based, then, in addition, Calculus (or Mathematics for Economics) is required.

Visiting Undergraduates MUST consult the course organiser during the first week of term to discuss pre-requisites.
High Demand Course? Yes
Course Delivery Information
Academic year 2017/18, Available to all students (SV1) Quota:  None
Course Start Semester 1
Timetable Timetable
Learning and Teaching activities (Further Info) Total Hours: 200 ( Lecture Hours 20, Seminar/Tutorial Hours 4, Feedback/Feedforward Hours 1, Summative Assessment Hours 2, Programme Level Learning and Teaching Hours 4, Directed Learning and Independent Learning Hours 169 )
Assessment (Further Info) Written Exam 100 %, Coursework 0 %, Practical Exam 0 %
Additional Information (Assessment) A 2 hour degree exam (80%), take home exam (20%).
Feedback Not entered
Exam Information
Exam Diet Paper Name Hours & Minutes
Main Exam Diet S1 (December)Economics of Financial Markets2:00
Learning Outcomes
On completion of this course, the student will be able to:
  1. A knowledge and understanding of key economic issues in the analysis of financial markets, including models and associated mathematical and statistical techniques, along with empirical evidence on and implications of those models and a deeper understanding of recent research activity in some more specialised areas.
  2. Research and investigative skills such as problem framing and solving and the ability to assemble and evaluate complex evidence and arguments.
  3. Communication skills in order to critique, create and communicate understanding.
  4. Personal effectiveness through task-management, time-management, dealing with uncertainty and adapting to new situations, personal and intellectual autonomy through independent learning.
  5. Practical/technical skills such as, modelling skills (abstraction, logic, succinctness), qualitative and quantitative analysis, and general IT literacy.
Reading List
There is no single text that covers all aspects of this course at an appropriate level. A variety of advanced readings will be used, mainly from economics and finance journals. Lecture handouts will refer to readings in the wider literature in a contextual manner.
Additional Information
Graduate Attributes and Skills See Learning Outcomes
Additional Class Delivery Information 1 x 2hr lecture per week. 4 x 1hr tutorials.
Course organiserProf Andy Snell
Tel: (0131 6)50 3848
Course secretaryMrs Anna Domagala
Tel: (0131 6)51 5305
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