Unit name | Risk and Return |
---|---|
Unit code | EFIM10028 |
Credit points | 20 |
Level of study | C/4 |
Teaching block(s) |
Teaching Block 2 (weeks 13 - 24) |
Unit director | Dr. Allard |
Open unit status | Not open |
Pre-requisites |
None |
Co-requisites |
Financial Markets, Institutions and Instruments |
School/department | School of Accounting and Finance - Business School |
Faculty | Faculty of Social Sciences and Law |
The unit aims to:
The unit syllabus is comprised of three sections.
1. Risk and return
This section will refer to the historical perspective on returns given in the previous term’s course and introduce a more statistical perspective. It will introduce Return definitions, their distributions and statistical properties. The concept of informational efficiency and why it is specific to Finance. Introduce the closely related concept of risk/return trade-off. Explain the equilibrium principles used in pricing (Law of one price). Finally, introduce portfolio theory and the CAPM;
2. Capital budgeting
The unit will introduce the concept of equilibrium, required rates of return and discount factors. Use stylized balance sheets to introduce the key issues in capital structure and asset pricing. Explain capital budgeting: Present Value analysis, internal Rate of Return, payback and survey evidence of their uses.
3. The nature of Finance
The unit will draw upon the institutional, historical, conceptual and evidence-based knowledge that has been acquired in the first year Finance courses to assess the Finance discipline as both a business subject and a social science (a branch of Economics). Its relationship with the related disciplines of Economics and Accounting; With other disciplines such as sociology and psychology.
Students will be able to:
Teaching will be delivered through a combination of synchronous and asynchronous sessions including lectures, tutorials, drop-in sessions, discussion boards and other online learning opportunities
This unit will be assessed by 100% exam
Textbooks
Selected chapters from either: Brealey, Myers and Allen, Principles of Corporate Finance, 2016 McGraw-Hill, 2016 or Ross, Westerfield, Jaffe, Hillier and Jordan, Corporate Finance, McGraw-Hill, 2016
Books and articles
Bernstein, Peter L. (1993), Capital Ideas: The Improbable Origins of Modern Wall Street, Simon and Schuster.
Bernstein, Peter L. (1998), Against the Gods: The Remarkable Story of Risk, Wiley
Dimson, Elroy, Paul Marsh & Mike Staunton (2002), Triumph of the Optimists. 101 Years of Global Investment Returns, Princeton University Press.
Graham, J. and Harvey, C. (2002), How do CFOs Make Capital Budgeting and Capital Structure Decisions? Journal of Applied Corporate Finance, 15: 8-23.