LEARNING OUTCOMES

Upon successful completion of this module, students will be able to:

Knowledge-based outcomes

1. explain the operation of  financial markets and understand their importance.
2. explain key theories and models of financial markets including  the efficient market hypothesis,  and understand  key implications.
3. analyse the operations and the  efficiency of  financial markets

   Skill-based outcomes

4. To identify and collect appropriate financial data and indices including share prices to carry out analysis of operations and  efficiency of financial markets.

Assessment Criteria

1. Evidence of background reading and relevance of the material to the question posed.
2. Appropriate use of up-date  Harvard referencing system .
3. Depth of analysis based on relevant academic literature , empirical evidence , and financial data analysis.
4. Appropriate conclusion based on relevant analysis of data, academic literature and  empirical evidence.

Guidance and Preparation  Note:

1. Overall word limit, excluding tables, charts, and graphs, is between 3000-4000 words.

1. Each question should be answered with close reference to  key published academic literature and relevant financial data and evidence.

2.For Q.1(b) you need (1) to review carefully key academic literature and relevant  published  empirical evidence on EMH  relating to your chosen stock exchange market, and (2) to carry  out  your own  financial data analysis based on a relevant  graphical  analysis of the movements in daily  share prices/ or  relevant all-  share price index ,over say a 90- days period, to arrive at a conclusion.

• THE UNIVERSITY’S REGULATIONS CONCERNING CHEATING, COLLUSION AND PLAGIARISM APPLY TO THIS Assessment.

Answer all questions and all parts. 

Q.1

a. Distinguish between different levels of market efficiency. Give examples to illustrate your answer.  (10 marks)

b. With  close reference to the efficient market hypothesis literature and by using  relevant empirical evidence and  financial data, critically assess the” efficiency” of an emerging  stock exchange market  of your own choice. (30 marks)

Q.2

Compare and contrast key role and functions of the capital markets with those of the money markets .Critically explain  how money markets’ activities  might influence asset  prices in the capital markets. Give examples to illustrate your answer.

Q.3

(a) Explain the nature of potential risks in international transactions and critically discuss how international traders might manage such risks via forward foreign exchange markets.

(b) Distinguish between the spot and the forward foreign exchange rates and examines the nature of the relationship between these two rates.

Q.4

Explain what you understand by each one of the following terms:

a. Asymmetric information
b. Moral hazard
c. Adverse selection
Give examples to illustrate your answer.

With close reference to these terms, critically discuss why there is a need for regulating financial markets.