View Specification DocumentEconomic Fundamentals And Financial Markets ECON5005
- Academic Session: 2023-24
- School: Adam Smith Business School
- Credits: 20
- Level: Level 5 (SCQF level 11)
- Typically Offered: Semester 2
- Available to Visiting Students: No
Short Description
The aim of this course is to outline how macroeconomics fundamentals influence asset returns and asset prices.
The point of departure of the baseline Capital Asset Pricing Model (CAPM) is to postulate that the returns on stocks follow some exogenous probability distribution; the point of departure of the Black-Scholes analysis of option prices is that the price of the underlying share of stock follows some exogenous stochastic process.
More generally, the standard theory of finance starts by postulating some exogenous stochastic process for the dividends or the prices of some interesting financial asset. The aim of this course is to analyse where these postulated processes originate.
Timetable
10 weekly 2-hour lectures plus 5 hours of tutorials
Requirements of Entry
Please refer to the current postgraduate prospectus at: http://www.gla.ac.uk/postgraduate/
Assessment
A one-hour in-course examination (25% of final grade for course) and a two-hour end-of-course examination (75% of final grade for course).
Main Assessment In: April/May
Course Aims
The aim of this course is to outline how macroeconomics fundamentals influence asset returns and asset prices.
The point of departure of the baseline Capital Asset Pricing Model (CAPM) is to postulate that the returns on stocks follow some exogenous probability distribution; the point of departure of the Black-Scholes analysis of option prices is that the price of the underlying share of stock follows some exogenous stochastic process.
More generally, the standard theory of finance starts by postulating some exogenous stochastic process for the dividends or the prices of some interesting financial asset. The aim of this course is to analyse where these postulated processes originate.
Intended Learning Outcomes of Course
By the end of this course, students will be able to:
1. Identify the role the financial sector plays in the economy at large, both in terms of resource allocation under uncertainty, trading of risk, and capital accumulation
2. Understand the determination of interest rates in general equilibrium.
3. Identify the fundamental prices of basic financial assets, such as shares of stock, in general equilibrium, with a focus on pricing risk.
4. Understand stock market price indices based on the market fundamentals in general equilibrium.
Minimum Requirement for Award of Credits
Students must submit at least 75% by weight of the components (including examinations) of the course's summative assessment.