Econ 340 Syllabus

No Econ 340 Syllabus

Overview

Financial markets and institutions channel trillions of dollars through the economy, affecting business, government, and consumer decisions and the welfare of consumers throughout the world. The purpose of this course is to guide students in mastering economic tools and critical thinking skills as applied to financial markets and institutions. Topics include the determination of asset prices; the risk and term structure of interest rates; the efficient markets hypothesis; risk management and financial derivatives, asymmetric information models of financial market structure, innovation, regulation and deregulation; and financial crises.

Prerequisites

E120, E130 or E131

Student Learning Outcomes

To be familiar with and able to explain key elements of financial markets and how they function, including the basic theory of assset demand and determination of asset prices, the role of arbitrage in financial markets, the role of information in financial markets, and the causes and consequences of financial crises.
To be able to use appropriate methods to analyze the issues listed above, and to draw appropriate conclusions about the effects of economic developments and policy interventions.

Required Text

Mishkin, Frederic and Stanley G. Eakins Financial Markets & Institutions , 7th edition.
Rent textbook via bookstore
Available at Amazon
Subscribe to Online Book

Eaton, James W. and Frederic Mishkin, Online Readings for Financial Markets & Institutions

Suggested (not required) Readings

The Lost Decades: The Making of America's Debt Crisis and the Long Recovery, Menzie Chinn and Jeffrey Frieden, 2011. W.W. Norton.

The Big Short: Inside the Doomsday Machine, Michael Lewis, 2010. W.W. Norton.

Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism, George Akerlof and Robert J. Shiller, 2009. Princeton University Press.

A Random Walk Down Wall Street, Malkiel, Burton G., 2000, W.W. Norton & Co.

Irrational Exuberance, Princeton University Press, Robert J. Shiller, 2nd Edition, 2006.

The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It, Robert J. Shiller, 2008.

Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing, Hersh Shefrin, 2000.

Stocks for the long run: the definitive guide to financial market returns and Long-Term Investment Strategies, Siegel, Jeremy J., 2002, McGraw-Hill

Examinations

Pop Quizzes will be given occasionally throughout the semester (5-6).

Problem Sets will be assigned for most chapters. These will be spot graded, and answer keys will be provided online.

The Midterm exam will be given on October 20, 2011.

The Final Exam is comprehensive and will be given on Thursday, December 15, 2011 from 12:00 to 2:00 PM The final exam is given in the regular class room.

The course grade will be assigned using +/- grading.

Weighting of Course Grade

Pop Quizzes: (average after dropping lowest score)

15%

Problem Sets: (average after dropping lowest score)

15%

Midterm

35%

Final

35%

Policies

I will make extensive use of the internet to distribute course materials, including old exams, answer keys, and assigned readings. Although I will attempt to notify you when major changes have been made to the web site, it is your responsibility to check the web site on a regular basis.

Attendance is mandatory; no make up quizzes will be given.

There will be no make up exams. Only medical emergencies are valid reasons for missing exams, in which case the weight of the missed exam will be allocated to any remaining exams.

Exams must be taken on the assigned dates. Please note the dates listed above for both the midterm and the final.

Assignments will not be accepted late (or by email). You may drop one problems set and one quiz grade from your average.

All of the assigned readings will not be covered in detail in class. You are responsible for all of the material in these readings. Assigned readings for each class meeting should be read prior to class and then carefully reviewed after class.

Class will be conducted in an open discussion/lecture style. Your participation is expected, and I will frequently call on students to discuss important topics.

I will always be available to you during my office hours, by email, phone and by special appointment. I encourage you to make use of my time. Please do not wait until the day of an exam to ask for my assistance.

Course Schedule
Below is a plan for the course, including exam dates, a lecture schedule (subject to change), and required readings. I will assign additional readings to accompany some chapters. Although some of these readings will not be covered in class, they are all required. In addition, any class handouts are required reading don't miss class.

Date

Begin Discussing:

Chapter

Aug.

23

Introduction
Why Study Financial Markets and Institutions?

1

25

Overview of the Financial System

1-2

Sept.

1

Fundamentals of Financial Markets
What Do Interest Rates Mean and What Is Their Role in Valuation?

3

8

Why Do Interest Rates Change?

4

15

How Do Risk and Term Structure Affect Interest Rates?

5

27

The Foreign Exchange Market and the International Financial System

15

Oct.

11

The Stock Market, Efficient Markets Theory and Models of Asset Pricing

13, 6,

Oct. 20 Midterm 1-5,15

Oct.

25

The Management of Financial Institutions
Banking and the Management of Financial Institutions

17

Nov.

8

Risk Management in Financial Institutions
23

10

The Fundamentals of Financial Institutions
Why Do Financial Institutions Exist?

7

Nov.
22

Why Do Financial Crises Occur...?
8

Dec.
1

Financial Regulation
18

Dec.

15

Final Exam 12:00-2:00 PM in REGULAR CLASS ROOM

Everything!

Pop Quizzes: (average after dropping lowest score)	15%
Problem Sets: (average after dropping lowest score)	15%
Midterm	35%
Final	35%

Date		Begin Discussing:	Chapter
Aug.	23	Introduction Why Study Financial Markets and Institutions?	1
	25	Overview of the Financial System	1-2
Sept.	1	Fundamentals of Financial Markets What Do Interest Rates Mean and What Is Their Role in Valuation?	3
	8	Why Do Interest Rates Change?	4
	15	How Do Risk and Term Structure Affect Interest Rates?	5
	27	The Foreign Exchange Market and the International Financial System	15
Oct.	11	The Stock Market, Efficient Markets Theory and Models of Asset Pricing	13, 6,
Oct.	20	Midterm	1-5,15
Oct.	25	The Management of Financial Institutions Banking and the Management of Financial Institutions	17
Nov.	8	Risk Management in Financial Institutions	23
	10	The Fundamentals of Financial Institutions Why Do Financial Institutions Exist?	7
Nov.	22	Why Do Financial Crises Occur...?	8
Dec.	1	Financial Regulation	18

Dec.	15	Final Exam 12:00-2:00 PM in REGULAR CLASS ROOM	Everything!