MSc Behavioural Finance detailed module information

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1 MSc Behavioural Finance detailed module information Example timetable Please note that information regarding modules is subject to change. TERM 1 TERM 2 TERM 3 INDUCTION WEEK EXAM PERIOD Week 1 EXAM PERIOD Weeks 1-3 ASSET PRICING JUDGEMENT AND DECISION MAKING DISSERTATION FOUNDATIONS OF CORPORATE FINANCE BEHAVIOURAL FINANCE ECONOMICS OF FINANCIAL MARKETS ELECTIVE QUANTITATIVE METHODS FOR FINANCE ELECTIVE CORE MODULES Term 1 Asset Pricing Gain an introduction to financial markets and techniques for valuation of risky assets. The skills acquired will be used in other modules and are essential for a financial economist. Financial markets and instruments; choice under uncertainty and risk measurement; state preference theory; meanvariance portfolio theory; equilibrium in capital markets; testing CAPM and APT; CAPM variants; APT and Consumption CAPM; efficient capital markets; introduction to derivatives; portfolio performance evaluation.

2 Assessment consists of a series of online tests during Term 1 worth 20% of the final mark and a two-hour examination in Term 2 (January) equivalent to 80%. Foundations of Corporate Finance Undertake in-depth analysis of the key determinants of the investment and financing decisions of the firm. Capital budgeting; capital structure; dividend policy; mergers and takeovers. Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark, and a two-hour examination in the first week of Term 2 (January) equivalent to 80%. Economics of Financial Markets Learn the basic tools of economic analysis, and gain an understanding of policy issues relevant to financial markets and the economic context within which they operate. Study the basic tools of microeconomic analysis and modern macroeconomic theory. Consumption and production theory and general equilibrium; strategic interaction; asymmetric information and agency problems; The ISLM model; monetary and fiscal policy; credibility and the role of expectations; The Yield Curve and the stock market; Dynamic ISLM. Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark and a two-hour examination in the first week of Term 2 (January) equivalent to 80%. Quantitative Methods for Finance Explore the basic tools for quantitative analysis of the financial markets and learn the quantitative skills you will need for other modules such as, for instance, Asset Pricing and most importantly, Empirical Finance. The first two lectures of the module are an introduction to statistics. The remaining lectures cover the material corresponding to a sound introduction to econometrics. Statistics: sampling, sampling distributions, point estimation, confidence intervals, hypothesis testing; linear regression model, estimation and inference; departures from the classical linear model assumptions: multicollinearity, heteroscedasticity, autocorrelation; model specification and diagnostic testing; introduction to time series econometrics. ARMA models; trends and cointegration analysis. Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark and a two-hour examination in the first week of Term 2 (January) equivalent to 80%. CORE MODULES Term 2 Judgement and Decision Making Gain an introduction to the psychology of human judgement and decision making. This field provides the foundation for understanding the decision-making processes involved in financial markets. Explore how the insights from this work can help you understand the origins of rational and irrationality in financial decision makers and financial markets; help improve your own financial decision-making, judgements and predictions; and provide a broader understanding of decision-making throughout the finance industry, including strategic and managerial decisionmaking. The nature of rationality; theoretical perspective on human judgement; the psychology of value and utility; decision making under certainty; decision making under risk; judgement; confidence and expertise; decision making in markets, groups and society.

3 Assessment will be by means of a 3,000 word essay worth 80% of the final mark and a group seminar presentation for the remaining 20%. Behavioural Finance Psychologists working in the area of behavioural decision-making have produced much evidence against the adequacy of neoclassical economics. Behavioural finance comprises financial analysis which relaxes some of these assumptions. It is a paradigm where financial markets are studied using models that are less narrow than those based on von Neumann-Morgenstern expected utility theory and arbitrage assumptions. Market Efficiency; Prospect theory; Loss aversion; the impact of Knightian uncertainty; limits to arbitrage; overconfidence in financial markets; herding and asset bubbles; paradoxes and anomalies; the disposition effect; investor sentiments. Assessment consists of a two-hour examination in Term 3 (April/May) equivalent to 70% of the final mark and coursework worth 30%. ELECTIVE MODULES TERM 2 Students are required to choose TWO elective modules from those listed below. This is an indicative list only; further information and confirmation of the available electives will be provided at the end of Term 1. Advanced Corporate Finance Explore the basic issues in mergers and acquisitions (M&As) and undertake in-depth analysis of the key determinants of M&A activities of firms around the world. Consider the wider issues of agency problems and corporate governance that are associated with M&A activities. Value creation in takeovers; abnormal returns; merger waves; private equity; merger arbitrage; takeover defenses; costs and benefits of concentrated ownership; modeling the takeover process. Assessment consists of coursework worth 40% of the final mark and a 1 ½ hour examination in Term 3 (April/May) equivalent to 60%. Alternative Investments Explore today s complex investment management environment and gain the insights needed to make well-informed decisions. Hedge Funds; Active currency strategies, Global Macro hedge funds and Macro Economic fundamentals; Private Equity; Limited Partnerships. Assessment consists of Coursework worth 30%, a 1,500 word essay worth 30% and a 2 hour examination worth 40%. Big Data Analytics Learn about mining, processing, analysing, and visualising large data sets to anticipate real world events and understand collective human behaviour. Discover key principles and concepts in big data analytics in a computational social science context and explore a range of examples based on big data including detection of riots, disease outbreaks, and economic and financial instability. Data mining of publicly available information; processing large data sets; visualising temporal data; visualising spatial data; distributions; correlations; nowcasting and forecasting; complexity. Assessment consists of an individual assisgnment of 3000 words worth 80% and two pieces of assessed group coursework worth 20%.

4 Derivative Securities Explore the rich variety of derivative contracts that exist, the ways in which they may be used and the models that can be used to determine their prices. Although the module covers both theory and application, it does not require a particularly high level of mathematics. Much of the development for options pricing is based on binomial trees. The module has relevance both for potential users of derivatives and for those who need to understand risk management using derivatives. Arbitrage and futures prices; bounds on option prices; binomial models for options; Black/Scholes model for options and its applications; hedging with futures and options; stock-index options and portfolio insurance; interest-rate futures and swaps; warrants and convertibles; exotic options. Assessment consists of a module test worth 20% of the final mark and a two-hour examination in Term 3 (April/May) equivalent to 80%. Empirical Finance Gain an understanding of the theory and practice of financial econometrics with lectures covering theory as well as empirical applications. Your practical skills will be further developed in computer-lab based seminars. Introduction to the statistical framework for empirical modelling of financial time series; stationary processes; of nonstationary processes; non-linear models, including models of time varying risk, with applications in risk management. Applications will include the empirical testing of asset pricing models such as CAPM, portfolio allocation, forecasting, yield curve modelling and nonlinear adjustment in foreign exchange markets; Efficient Market Hypothesis (EMH). Assessment consists of two module tests worth 20% each, one group project worth 20%, and a one-hour exam in Term 3 (April/May) worth 40%. Financial Engineering Examine recent developments in financial engineering and structuring and apply your learning to real world problems and situations. Deepen your knowledge of particular areas that are at the forefront of academic research in derivative markets. As this is a highly quantitative module an advanced level of mathematics is required; it is particularly suitable if you have an undergraduate degree in mathematics. Topics covered may include: Modelling of volatility and correlation and derivative products based upon them; the pricing of derivatives on commodities and other non-financial underlying variables; the pricing and hedging of exotic options; study of a Ponzi scheme; client conflicts in designing a collateralised debt obligation. Assessment consists solely of a 3,000 word project. Financial Reporting and Financial Statement Analysis Consider a framework for evaluating the financial performance of a company, forecasting its future performance and estimating its fundamental value. Consider the relative usefulness of cash flow and profit data for assessing financial performance and the use of ratio analysis for evaluating past performance and forecasting future financial performance. Financial statements and their use in financial analysis; financial reporting and IFRS; reformulation of financial statements; ratio analysis and forecasting financial performance; cash flow and accounting valuation models; valuation theory in practice; financial statement analysis; market efficiency and earnings management; issues and developments in financial reporting and statement analysis; corporate governance and management communication, financial statement quality and the cost of capital. Assessment consists of an individual project worth 80% of the final mark and a group presentation worth 20%. Financial Risk Management

5 Examine financial risk management and the techniques to assess financial risks according to the regulatory framework, having the management of risk exposure in view. Learn the quantitative methods of risk measurement and risk management. How to identify financial risks; coherent risk measures; models for uncertainty; numerical tools Monte Carlo simulation; approximations and factor reduction; Bayesian uncertainty parameter risk; The regulatory framework of financial risk management. Assessment consists of a module test during Term 2 worth 20% of the final mark and a two-hour examination in Term 3 (April/May) equivalent to 80%. Financial Software and its Development Gain realistic, hands-on experience of the kind of software development you might use if employed in a development team for an investment bank or investment management company. Focussing on tools and techniques most likely to be used in the front office, where risk and return characteristics are analysed and investment decisions made. The development, testing and operation of working software in small teams and following practices similar to those found in the workplace. Assessment consists of a 1,500 word essay worth 30%, a presentation worth 20% and a programming assignment worth 50%. Fixed Income and Credit Risk Explore the tools for the assessment and management of fixed income and credit risk. Bonds and Money-Market Instruments; Bond Prices and Yields; term structure of interest rates; Martingale pricing; continuous-time stochastic processes; affine term structure models; credit risk management; structural and intensitybased credit risk modelling; credit derivatives. Assessment consists of a module test and a group project each worth worth 10% of the finak mark, and a a two-hour examination in Term 3 (April/May) worth 80%. International Financial Markets Consider of the theory and evidence relating to international financial markets, and in particular the foreign exchange market. Efficiency of the Foreign Exchange (Forex) Market; Purchasing Power Parity and the Real Exchange Rate; Exchange Rate Determination; Forecasting Exchange Rates; Exchange Rate Models and Economic Value; Official Intervention in the Forex Market; The Microstructure of the Forex Market; Active Management of Forex Portfolios. Assessment consists of a module test during Term 2 worth 20%. Of the final mark and a two-hour examination in Term 3 (April/May) equivalent to 80%. International Financial Management Explore corporate financial decision-making within the context of the increasing globalisation of business, exchangerate volatility, and the internationalisation of financial markets. Extend your understanding of the theory of corporate financial management, covered in the Foundations of Corporate Finance core module, to an international setting. Forward Exchange Rates; Forward Contracts for International Financial Management; Currency Futures: Markets and Uses; Swap Markets; Currency Options; Exchange Rate Risk; International Corporate Investment.

6 Assessment consists of a group project during Term 2 worth 20% of the final mark, and an examination in Term 3 (April/May) equivalent to 80%. Investment Management Consider the theoretical and practical treatment of modern portfolio theory and portfolio management, mainly from an equity market perspective. Review of financial instruments and financial markets; international diversification; passive asset allocation; performance measurement; equities; active portfolio management; bonds; forwards and futures; options. Assessment consists of a group project worth 25% of the final mark and a two-hour examination in Term 3 (April/May) worth 75%.