BUST10032: Investment and Securities Markets (Solutions)

The course aims to develop an understanding of the theory and practice of investment and securities markets. It provides the concepts and tools which will help graduates cope in the increasingly sophisticated investment markets. Discussion of academic research is combined with an emphasis on practical application. Succeeding in the course depends on solid understanding and ability to apply the tools of statistical hypothesis testing, linear regression, calculus and optimisation. The first half of the course involves numerous derivations and in-depth understanding of three key finance models: Markowitz portfolio optimisation model, Single Index Model and Capital Asset Pricing Model. The second half of the course involves high level discussion and comparison of these different theoretical models and their extensions.

✔ Outline Content:

- overview of securities markets;
- introduction to risk and return;
- optimal risky portfolios;
- index models;
- the Capital Asset Pricing Model;
- the Efficient Market Hypothesis;
- behavioural finance and technical analysis;
- empirical evidence on security returns;
- international diversification.

Pre-requisite: Students MUST have passed Introduction to Corporate Finance (BUST08030).

Applications of Econometrics