EC4024 Financial Economics 2015

This is the course page for EC4024, Financial Economics, Spring 2015.

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Data Project Guidelines, Dataset (xlsx format). Turintin Details

Lectures/Readings

1. Introduction to the module. (updated, .pdf)

What is the purpose of finance? Basics of valuation, how investors value firms, how firms take decisions to invest. An example from real estate finance.

2. How to read a balance sheet, what equity is, and isn’t, how leverage works. The role of leverage in the collapse of the Irish economy.

Adrian and Shin, 2009, Liquidity and Leverage.
Bolton et al, Investment, Liquidity, and Financing under Uncertainty
Ronan Lyons, Thomas Piketty and the subsidy of leverage.

3. What is money? How it is made? Where does it come from? Quantitative easing in the modern economy.

McLeay et al, Money creation in the modern economy, Bank of England
Tobin, J (1963), ‘Commercial banks as creators of ‘money’’, Cowles Foundation Discussion Papers No. 159.

4. Contract theory and monitoring. Finance, convenants and ‘the law’. Burning bondholders and all that: why Parri Passu matters more than you do.

Oliver Williamson: The theory of the firm as governance structure: from choice to contract. Journal of Economic Perspectives, 2002.
Shleifer and Vishny, A Survey of Corporate Governance, Journal of Finance, 1997

5. How Lombard Street works, theory of the dealer, and your very first real supply and demand curves. Stigum’s Money Markets, the economics of the dealer function.

Merling, New Lombard Street, Chapters 2 and 3.
M.F.M Osborne, The Stock Market from a Physicist's Viewpoint, Crossgar Press, 1977 Chapter 2 and Chapter 3.
Janeway, William "Doing Capitalism in the innovation economy: Markets, capitalism, and the State", Cambridge University Press, 2013
Jack Treynor, The economics of the dealer function

6. Bond Markets: not all they are cracked up to be. Pricing, allocation and provenance of bonds. Bond markets and FX markets.

K. Pilbeam, Finance and Financial Markets, 3rd Ed, Palgrave, 2009, chapter 6.
Stigma's Money Markets, chapter2, 1, 2, and 3 (up to Duration and Convexity).

7. Zombie theories of finance. CAPM, APT, EMH. Acronyms you need to know and distrust deeply.

Watch John Quiggin's lecture on Zombie Economics.
Watch Paul Samuelson's Masters of Finance interview.
Modigliani, F. and Miller, M. (1958) "The Cost of Capital, Corporation Finance and the Theory of Investment", American Economic Review 48 (3), pp. 261-297.
Fama, E.F. (1970) "Efficient Capital Markets: A Review of Theory and Empirical Work", Journal of Finance 25 (2), pp. 383-417.
André F. Perold The Capital Asset Pricing Model The Journal of
Economic Perspectives, Vol. 18, No. 3. (Summer, 2004), pp. 3-24.
(Here are some Notes on CAPM I made a few years ago)
Anne Villamil, Modigliani Miller Theorem, New Palgrave Dictionary of Economics

8. Finance, Innovation and Growth 1: Basics

Greenwald, B. C. and Stiglitz, J. E. (1993). Financial market imperfections and business cycles. The Quarterly Journal of Economics,108(1)

9. Finance, Innovation and Growth 2: Refinements

Perez, C. (2010). Technological Revolutions and Techno-Economic Paradigms. Cambridge Journal of Economics, 34(1).
Romer, P. (1990). Endogenous Technological Change. Journal of Political Economy, 98(5)

10. Algorithmic Trading

Arnuk, Sal and Joseph Saluzzi (2012), Broken Markets, Chapters 2 and 10.
Tarun Chordia, Amit Goyal, Bruce N. Lehmann, Gideon Saar (2013) High-frequency trading, Journal of Financial Markets 16(4).

11. Finance, Economics, and Bitcoin: Don't believe the hype.