module specification

The aim of this module is to provide rigorous training in the modern theory of investment and capital markets and a good understanding of their central concepts.
This module provides a theoretical and practical framework for understanding the relationship between markets and corporations and the interactions between them. The module critically explores the current theoretical perspectives and specifically considers their practical application in relation to investment strategies and corporate decision making.
The contents of the module cover financial markets and instruments, financial investment strategies, the valuation of securities and derivatives, bond portfolio immunisation, risk and return, and the evaluation of investment performance.
Analysis of theories in finance and investment and financial models includes the Efficient Market Hypothesis, Portfolio Theory, the Capital Asset Pricing Model, Arbitrage Pricing Theory and the Dividend Valuation Model.
The module provides a thorough knowledge of investment and guides students on assessing risks and managing risks for businesses and investments.  The module builds up the strong quantitative, written, critical and analytical skills required for employment in the finance industry.
A blended teaching and learning approach may include the use of websites, videos, guest talks from industry and support for employability enhancing classroom activities.
Bloomberg may be used to deliver teaching sessions in seminars.

• Financial markets and instruments: Money markets, foreign exchange markets, bond markets, equity markets, derivative markets, unit trusts, investment trusts, market regulation, market data and ratios, technological and financial change and innovation. - LO1, LO2
• Financial investment strategies: The theory of the Efficient Market Hypothesis (EMH), empirical evidence, the EMH testing methodology, active and passive trading strategies, fundamental analysis, technical analysis and behavioural finance. - LO1, LO2
• Valuation of securities and derivatives: Equities, bonds, forwards, futures and options. - LO1, LO2
• Bond Portfolio Immunisation: term structure of interest rates, duration, immunisation of bond portfolios. - LO1, LO2
• Risk and return: The statistical estimation of return and risk, types of risk, diversification, the Morden Portfolio Theory (MPT), the Capital Asset Pricing Model (CAPM), and the Arbitrage Pricing Theory (APT). - LO3
• Risk management: Risks, risk hedging and speculation with derivatives. - LO3
• Evaluation of investment performance evaluation: sharp ratio, Treynor ratio, and benchmark return of portfolios. - LO3

Teaching is structured by lectures and seminars. The formal lectures of two hours will take place every week and these will be interactive, requiring students to participate in in-class exercises and discussion.
The lectures are supported by one-hour seminars. Seminars may be delivered in the financial market Lab – Bloomberg, which provides the use of live market data to understand investment in real markets as work related learning approach in finance. Seminars typically provide a forum for discussion of class exercises based on either theory, case studies or the practical application of topics explored in the lecture. Some seminar time may be allocated to use of IT resources such as MS Excel spreadsheets and retrieval and analysis of market data from sources such as Bloomberg.
Both lecture and seminar activities are structured to enable students to initially develop basic knowledge and then to progress to developing a deep and rich understanding of corporate finance and analysis of investment. Class exercises require students to carry out independent work prior to seminars and explore their ideas in the class with their peers and the tutor.
Professional and transferable skills are developed in lectures and seminars, and through independent directed learning and assessment. Skills development is enhanced through problem solving practiced in seminars and preparing for formative and summative assessments. Initiative and independence are developed progressively throughout the module such that students are encouraged to take greater responsibility of their learning.

On completion of this module students will be able to:

1. Understand financial markets and the main financial theories.
2. Critically apply the main theoretical models for determining the fair value of securities and derivatives such as equity shares, bonds, forwards, futures, and options.
3. Critically analyse the relationship between risk and return and the concept of corporate diversification, evaluate construction, selection and management of investment portfolios and demonstrate the quantitative, written, critical and analytical skills required for employment in the finance industry.

Core Textbooks:

Bodie, Z., Kane, A., and Marcus, A. (2014), Investments, 10th Edition, McGraw Hill.

Pike, R., Neal, B., Akbar, S. and Linsley, P. (2018), Corporate Finance and Investment: Decisions and Strategies, 9th Edition, Pearson Education Limited, Harlow.

Other useful texts:

Brealey R. A., Myers S.C. and Franklin A., (2019), Principles of Corporate Finance. 13th Edition, McGraw Hill.

Copeland, T. E. and Weston, J. F. and Shastri, K. (2013), ‘Financial Theory and Corporate Policy’, 4th Edition, Pearson Education.

Elton, E.J., Gruber, M.J., Brown, S.J. and Goetzmann, W. (2017). Modern Portfolio Theory and Investment Analysis, 9th Edition, Wiley Custom.

Levy, H. (2002), Fundamentals of Investments. Pearson Education Limited.

Lofthouse, S. (Editor), (1995), Readings in Investments. John Wiley. (Out of print but available in the library).

Pilbeam, K., (2018), Finance and Financial Markets, 4th Edition, Palgrave, London.

Redhead, K., (2003), Introducing Investment: a personal finance approach. Pearson Educational, Edinburgh.

Journals:
The Journal of Finance
The Journal of Economics and Finance

Data Sources:
Bloomberg

Internet Sources
http://www.hsbcnet.com/treasury/futures-and-options
http://www.bloomberg.com
http://www.thebigproject.co.uk/money.htm
http://www.duke.edu/~charvey/Classes/ba453/groups05.htm

Media:
The Financial Times
The Wall Street Journal