Financial Markets and Decisions I

Module description


The pair of modules BEE2027 and BEE3034 present the theory of decision-making under risk and the economics of information, discussing applications of the theory in the areas of banking and finance. The topics covered include expected utility theory, CAPM, adverse selection, moral hazard, the Modigilani-Miller theorems and the incentive effects of debt and equity. Applications are discussed including auctions and insurance.

Additional Information:


The module content is globally relevant as it theoretically discusses financial markets, international trends in asset pricing models used by the majority of firms, and comparative studies through up-to-date research.


Students acquire several skills valued by employers, including a theoretical knowledge and understanding of financial markets, the application of theory, the ability to think like an economist, and designing firm level policies.

Full module specification

Module title:Financial Markets and Decisions I
Module code:BEE2027
Module level:2
Academic year:2020/1
Module lecturers:
  • Dr Jack Rogers - Convenor
Module credit:15
ECTS value:






Duration of module: Duration (weeks) - term 2:


Module aims

This course aims to describe the theoretical foundations of the economic frameworks that are used to study important issues in Finance. Financial markets are characterized by risk and uncertainty. The role of risk and uncertainty in the decision-making of various agents participating in financial markets will be studied in detail.

ILO: Module-specific skills

  • 1. apply economic analysis to asset pricing and decision-making under risk and uncertainty

ILO: Discipline-specific skills

  • 2. explain the basic asset pricing equation and decision-making by agents under conditions of risk and uncertainty and the consequences of these decisions in the financial markets.
  • 3. critically analyse the arguments made in support of CAPM and The Efficient Markets Hypothesis.

ILO: Personal and key skills

  • 4. think analytically about financial markets and firms
  • 5. present technical argument

Learning activities and teaching methods (given in hours of study time)

Scheduled Learning and Teaching ActivitiesGuided independent studyPlacement / study abroad

Details of learning activities and teaching methods

CategoryHours of study timeDescription
Scheduled Learning and Teaching activities20Lectures

Formative assessment

Form of assessmentSize of the assessment (eg length / duration)ILOs assessedFeedback method
A problem set for each topic and a revision sheet after all topics are completed.1 hour1-5Written and verbal feedback after students have had the chance of going through the problem sheets on their own.

Summative assessment (% of credit)

CourseworkWritten examsPractical exams

Details of summative assessment

Form of assessment% of creditSize of the assessment (eg length / duration)ILOs assessedFeedback method
Mid-Term2050 minutes1-5Written or oral feedback
Examination801.5 hours1-5Written or oral feedback

Details of re-assessment (where required by referral or deferral)

Original form of assessmentForm of re-assessmentILOs re-assessedTimescale for re-assessment
Mid-Term Exam and ExaminationExamination (100%) 1.5 hours1-5August/September assessment period

Syllabus plan

  •  Decision making over time
  • Decision making under uncertainty
  • Mean-Variance preferences
  • Consumption-Based Asset Pricing
  • Equity Premium Puzzle
  • CAPM foundations
  • Perfect Markets
  • Efficient Markets Hypothesis

Indicative learning resources - Basic reading

Basic reading:

  • Varian, H. (2010) Intermediate Microeconomics: A Modern Approach (8th Edition), W.W. Norton & Company
  • Welch, I. (2013) Corporate Finance (3rd Edition), Pearson
  • Olen, H. and Pollack, H (2016) The Index Card: Why Personal Finance Doesn’t Have to Be Complicated, Penguin Publishers


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