ECON 2508 - Financial Economics II
North Terrace Campus - Semester 1 - 2014
General Course Information
Course Code ECON 2508 Course Financial Economics II Coordinating Unit School of Economics Term Semester 1 Level Undergraduate Location/s North Terrace Campus Units 3 Contact Up to 3 hours per week Incompatible ECON 2012 Assumed Knowledge CORPFIN 2006 or ECON 1009 Quota A quota will apply Course Description This course is designed to provide both a self contained study of the principles of financial economics, and a bridge between courses such as International Financial Institutions and Markets I or Business Finance II and third year finance courses. It includes a critical discussion of the efficient markets theory, an overview of quantitative methods in finance, considers risk aversion in the context of utility theory, examines portfolio theory, the Capital Asset Pricing Model and multi-factor asset pricing models, covers bond pricing, duration and convexity, theories of the term structure of interest rates, the dividend discount and price-earnings models of share valuation, and introduces the top down approach to investment decisions.
The emphasis is on a thorough coverage of modern finance theory as applied to investment analysis, balanced with a consideration of new developments in the discipline, and of the application of both old and new theoretical perspectives to understand the current environment for financial investment decisions.
Course Coordinator: Dr Steven Hail
The full timetable of all activities for this course can be accessed from Course Planner.
Course Learning OutcomesOn successful completion of this course students will be able to:
1 Have an understanding of and ability to discuss critically the efficient markets theory of financial markets and behavioural finance 2 Have an understanding at an introductory level of quantitative methods in finance 3 Have an understanding of risk aversion in the context of utility theory 4 Have an understanding and ability to discuss critically portfolio theory, the Capital Asset Pricing Model and multi-factor asset pricing models 5 Have the ability to apply the theory of bond pricing, duration and convexity 6 Have the ability to apply theories of the term structure of interest rates 7 Have the understanding of financial instability and crisis 8 Continuing development of good inter-personal and communication skills is widely recognised as important for all graduates. This course specifically seeks to develop students’ abilities to contribute actively to discussions in tutorial groups
University Graduate Attributes
This course will provide students with an opportunity to develop the Graduate Attribute(s) specified below:
University Graduate Attribute Course Learning Outcome(s) Knowledge and understanding of the content and techniques of a chosen discipline at advanced levels that are internationally recognised. 1-7 The ability to locate, analyse, evaluate and synthesise information from a wide variety of sources in a planned and timely manner. 2, 7 An ability to apply effective, creative and innovative solutions, both independently and cooperatively, to current and future problems. 4 Skills of a high order in interpersonal understanding, teamwork and communication. 1-7 A proficiency in the appropriate use of contemporary technologies. 4 A commitment to continuous learning and the capacity to maintain intellectual curiosity throughout life. 1-7
Required ResourcesBodie, Ariff, da Silva Rosa, Kane and Marcus
McGraw Hill Australia Pty Ltd, 2007
Students also require a financial calculator (or other calculator with financial functions). A model will be recommended by the lecturer during week one.
Recommended ResourcesAdditional materials will be recommended on the MyUni site.
Online LearningA number of links to additional readings will be posted on MyUni, alongside lecture recordings and other materials.
Learning & Teaching Activities
Learning & Teaching Modes
Students in this course are expected to attend all lectures throughout the semester plus one tutorial class each week. The problem-solving tutorials support the lectures, and prepare students for their mid-term and final examinations.
Tutorials will be held weekly commencing the second week of the semester. Membership of tutorial classes is to be finalised by the end of the second week of semester. Students wishing to swap between tutorial classes after this time are required to present their case to the tutor-in-charge, but should be aware that such a request may not be approved.
Tutorials are an important component of your learning in this course. The communication skills developed in tutorials by regularly and actively participating in discussions are considered to be most important by the School and are highly regarded by employers and professional bodies.
The information below is provided as a guide to assist students in engaging appropriately with the course requirements.The University expects full-time students (i.e. those taking 12 units per semester) to devote a total of 48 hours per week to their studies. This means that, for this course, you are expected to commit approximately 9 hours to private study, that is, study outside of your regular classes.
Learning Activities Summary
Week Essential Reading (Bodie etc) Course Plan Tutorials 1 Chapter 5
(Chapters 1-4 are also valuable revision)
An Introduction to Financial Economics No tutorials 2 Chapter 6 Risk and Risk Aversion Tutorial set 1 3 Chapter 7 The Capital Allocation Decision Tutorial set 2 4 Chapter 8 Optimal Risky Portfolios Tutorial set 3 5 Chapter 9
(The lectures will also draw on Chapter 10)
The Capital Asset Pricing Model and some of its limitations Tutorial set 4 6 Chapter 9
(The lectures will also draw on Chapter 10)
Multi-Factor Models (Arbitrage Pricing Theory) Tutorial set 5 7 Chapter 11 Rise and Partial Fall of the Efficient Markets Hypothesis Tutorial set 6 8 Chapter 12
(Some of this topic will be self study)
Rise of Behavioural Finance Tutorial set 7 9 Chapter 14
(The lectures will also draw on Chapter 16)
Bond Yields and Interest Rate Risk Tutorial set 8 10 Chapter 15 The Term Structure of Interest Rates Tutorial set 9 11 Online reading Minsky’s Financial Instability Hypothesis and Financial Crises Tutorial set 10 12 Finishing off and overview Tutorial set 11
The University's policy on Assessment for Coursework Programs is based on the following four principles:
- Assessment must encourage and reinforce learning.
- Assessment must enable robust and fair judgements about student performance.
- Assessment practices must be fair and equitable to students and give them the opportunity to demonstrate what they have learned.
- Assessment must maintain academic standards.
Assessment SummaryAssignment 1 (Individual Assignment)
Weighting: 10% (redeemable in final exam)
Published in Week 1, this will be a mainly technical assignment.
To be handed in by the end of Week 4
To be returned to you by the end of Week 6
Learning Objective 2, 3
Assignment 2 (Group Assignment)
Weighting: 15% (redeemable in final exam)
Published in Week 4. It will involve the use of Solver to identify an ‘efficient’ portfolio of risky assets. Students will be required to watch a video which will be published on MyUni explaining the process of using Solver. The main part of the assignment will involve the application of utility theory, portfolio theory and the theory of portfolio selection.
To be handed in by the end of Week 7
To be returned to you by the end of Week 9
Learning Objective 4
Total Weighting: 15% (redeemable in final exam)
Online test 1: Weighting 5% (redeemable in final exam)Week 515 multiple choice questions40 minutes durationCovers topic 1 – 4Learning Objectives 2, 3Online test 2: Weighting 5% (redeemable in final exam)Week 915 multiple choice questions40 minutes durationCovers topic 5 – 8Learning Objectives 1, 4Online test 3: Weighting 5% (redeemable in final exam)Week 1215 multiple choice questions40 minutes durationCovers topic 9 – 11Learning Objectives 5, 6, 7Final Examination
Supervised, Closed Book, Graded Format:
The exam will comprise some short answer questions and longer written/problem questions. A mock examination will be posted on Myuni.
Date: Please refer to the examination timetable for details of exam location and time.
Learning Objectives 1-7 (with an emphasis on Objectives 5, 6 and 7)
Assessment Related RequirementsThe minimum grade to pass this subject is a mark of 50% overall. There are no separate requirements for individual assessments.
Assessment DetailAssessment details are given in the Assessment Summary above.
SubmissionAssignment submission details will be published on MyUni at the beginning of the course. Assignments will normally be marked and returned to students within 3 weeks of submission.
Late submission & absences
Missing a test will result in a zero score unless the lecturer is supplied (within 5 working days from the date of the test) with documentary evidence of the reason for non-attendance such as a medical certificate or letter from your employer. Problem sets and assignments submitted late will not be accepted unless accompanied by documentary evidence (as above). If a student misses a tutorial and has documentary evidence (as above) they should consult with their tutor who will adjust their marks accordingly. Note that merely being at work is not considered as reasonable grounds for missing a test or tutorial. A conference or interstate trip may be reason enough.
Grades for your performance in this course will be awarded in accordance with the following scheme:
M10 (Coursework Mark Scheme) Grade Mark Description FNS Fail No Submission F 1-49 Fail P 50-64 Pass C 65-74 Credit D 75-84 Distinction HD 85-100 High Distinction CN Continuing NFE No Formal Examination RP Result Pending
Further details of the grades/results can be obtained from Examinations.
Grade Descriptors are available which provide a general guide to the standard of work that is expected at each grade level. More information at Assessment for Coursework Programs.
Final results for this course will be made available through Access Adelaide.
The University places a high priority on approaches to learning and teaching that enhance the student experience. Feedback is sought from students in a variety of ways including on-going engagement with staff, the use of online discussion boards and the use of Student Experience of Learning and Teaching (SELT) surveys as well as GOS surveys and Program reviews.
SELTs are an important source of information to inform individual teaching practice, decisions about teaching duties, and course and program curriculum design. They enable the University to assess how effectively its learning environments and teaching practices facilitate student engagement and learning outcomes. Under the current SELT Policy (http://www.adelaide.edu.au/policies/101/) course SELTs are mandated and must be conducted at the conclusion of each term/semester/trimester for every course offering. Feedback on issues raised through course SELT surveys is made available to enrolled students through various resources (e.g. MyUni). In addition aggregated course SELT data is available.
- Academic Support with Maths
- Academic Support with writing and speaking skills
- Student Life Counselling Support - Personal counselling for issues affecting study
- International Student Support
- AUU Student Care - Advocacy, confidential counselling, welfare support and advice
- Students with a Disability - Alternative academic arrangements
- Reasonable Adjustments to Teaching & Assessment for Students with a Disability Policy
Policies & Guidelines
This section contains links to relevant assessment-related policies and guidelines - all university policies.
- Academic Credit Arrangement Policy
- Academic Honesty Policy
- Academic Progress by Coursework Students Policy
- Assessment for Coursework Programs
- Copyright Compliance Policy
- Coursework Academic Programs Policy
- Elder Conservatorium of Music Noise Management Plan
- Intellectual Property Policy
- IT Acceptable Use and Security Policy
- Modified Arrangements for Coursework Assessment
- Student Experience of Learning and Teaching Policy
- Student Grievance Resolution Process
Students are reminded that in order to maintain the academic integrity of all programs and courses, the university has a zero-tolerance approach to students offering money or significant value goods or services to any staff member who is involved in their teaching or assessment. Students offering lecturers or tutors or professional staff anything more than a small token of appreciation is totally unacceptable, in any circumstances. Staff members are obliged to report all such incidents to their supervisor/manager, who will refer them for action under the university's student’s disciplinary procedures.
The University of Adelaide is committed to regular reviews of the courses and programs it offers to students. The University of Adelaide therefore reserves the right to discontinue or vary programs and courses without notice. Please read the important information contained in the disclaimer.