ECM132: The Economics of Financial Markets

Module code: ECM132

Module provider: Economics; School of Philosophy, Politics and Economics

Credits: 20

Level: 7

When you’ll be taught: Semester 2

Module convenor: Dr Mark Guzman , email: m.g.guzman@reading.ac.uk

Pre-requisite module(s):

Co-requisite module(s):

Pre-requisite or Co-requisite module(s):

Module(s) excluded:

Placement information: NA

Academic year: 2025/6

Available to visiting students: Yes

Talis reading list: Yes

Last updated: 3 April 2025

Overview

Module aims and purpose

This course is designed to provide you with an introduction to the fundamental principles, ideas, and analytic concepts used in the study of financial markets, institutions, and assets.  The first part of this course will introduce the main concepts of financial markets. This section will detail the different markets in which financial assets are traded, the different assets used in these markets, and the institutions through which these assets are traded.  The second part of the course deals with developing a basic economic understanding of how assets are valued.  Simple, general equilibrium mathematical models will be developed to illustrate the basics of pricing financial assets. The final part of the course exams the issues of risk and return via basic portfolio theory. In this section we will examine the most common portfolio models and develop an understanding of their strengths and weaknesses. 

Module learning outcomes

By the end of the module, it is expected that students will be able to:

1. Understand the fundamentals of how assets are priced.
2. Understand how investors form their investment portfolios and explain/critique the most prominent theories explaining such decisions.
3. Understand the limitations of economic models with respect pricing assets and creating portfolios. 

Module content

Main topics may include: basics of financial markets and assets,  pricing of assets such as stocks and bonds,  general equilibrium models for determining assets prices, mean-variance portfolio theory, capital asset pricing model, introduction to financial markets and overview of financial institutions. 

Structure

Teaching and learning methods

Detailed guidance on the topics covered will be provided in the weekly lectures, together with comprehensive handouts covering the material discussed, examples, exercises and solutions to facilitate understanding of key concepts. Students may be required to do exercises corresponding to each topic, to read a significant amount of journal articles, and to undertake research using the library, internet, etc.

Study hours

At least 20 hours of scheduled teaching and learning activities will be delivered in person, with the remaining hours for scheduled and self-scheduled teaching and learning activities delivered either in person or online. You will receive further details about how these hours will be delivered before the start of the module.

Please note the independent study hours above are notional numbers of hours; each student will approach studying in different ways. We would advise you to reflect on your learning and the number of hours you are allocating to these tasks.

Semester 1 The hours in this column may include hours during the Christmas holiday period.

Semester 2 The hours in this column may include hours during the Easter holiday period.

Summer The hours in this column will take place during the summer holidays and may be at the start and/or end of the module.

Assessment

Requirements for a pass

Students need to achieve an overall module mark of 50% to pass this module.

Summative assessment

Penalties for late submission of summative assessment

The Support Centres will apply the following penalties for work submitted late:

Assessments with numerical marks

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of three working days;
• the mark awarded due to the imposition of the penalty shall not fall below the threshold pass mark, namely 40% in the case of modules at Levels 4-6 (i.e. undergraduate modules for Parts 1-3) and 50% in the case of Level 7 modules offered as part of an Integrated Masters or taught postgraduate degree programme;
• where the piece of work is awarded a mark below the threshold pass mark prior to any penalty being imposed, and is submitted up to three working days after the original deadline (or any formally agreed extension to the deadline), no penalty shall be imposed;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

Assessments marked Pass/Fail

• where the piece of work is submitted within three working days of the deadline (or any formally agreed extension of the deadline): no penalty will be applied;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension of the deadline): a grade of Fail will be awarded.

The University policy statement on penalties for late submission can be found at: /cqsd/-/media/project/functions/cqsd/documents/qap/penaltiesforlatesubmission.pdf

You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Formative assessment

Formative assessment is any task or activity which creates feedback (or feedforward) for you about your learning, but which does not contribute towards your overall module mark.

Reassessment

Additional costs