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University of Exeter Business School

Financial Markets and Decisions I

Module titleFinancial Markets and Decisions I
Module codeBEE2027
Academic year2023/4
Module staff

Dr Obaid Awan (Lecturer)

Duration: Term123
Duration: Weeks




Number students taking module (anticipated)


Module description


This course is the first in a two-part series on the economics of finance. 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.

This module, FMD I is divided in two parts: the first part deals individual decision making over time and under uncertainty. The second part links individual behaviour to financial markets and equilibrium, including risky assets, micro-foundations of CAPM, and the efficient market hypothesis. The module will also include an introduction to behavioural finance.

Students will be assessed through a mid-term test and a final exam.  


Additional Information:


The module content is globally relevant as it discusses financial markets theoretically, 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

Module aims - intentions of the module

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

Intended Learning Outcomes (ILOs)

ILO: Module-specific skills

On successfully completing the module you will be able to...

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

ILO: Discipline-specific skills

On successfully completing the module you will be able to...

  • 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;
  • 4. develop an understanding of the concepts of finance theory and its limitations

ILO: Personal and key skills

On successfully completing the module you will be able to...

  • 5. think analytically about financial markets and firms;
  • 6. Demonstrate technical knowledge and skills without reference to external sources of information or other resources.

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
  • Behavioural Finance

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
Guided Independent Study130Reading, preparation for classes and assessments

Formative assessment

Form of assessmentSize of the assessment (eg length / duration)ILOs assessedFeedback method
Problem sets for each topic and a revision sheet after all topics are completed.1 hour1-6Written 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-term test3060 minutes1-6Written or oral feedback
Examination7090 mins1-6Written 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 test (30%)Mid-term test (60 mins, 30%)1-6August/September Reassessment Period
Examination (70%)Examination (90 mins, 70%)1-6August/September Reassessment Period

Indicative learning resources - Basic reading

Core material

Varian, H. (2014) Intermediate Microeconomics: A Modern Approach (9th Edition), W.W. Norton & Company.

Workouts in Intermediate Microeconomics (9th Edition) by Bergstrom and Varian

Berk and DeMarzo (2020) Corporate Finance (5th Edition), Pearson Education

Bodie, Kane & Marcus (2021) Investments (12th edition), McGraw-Hill


Key words search

financial markets, decision making under uncertainty

Credit value15
Module ECTS


Module pre-requisites


Module co-requisites


NQF level (module)


Available as distance learning?


Origin date


Last revision date