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.
Answer all questions and all parts.
Q.1
a. Distinguish between different levels of market efficiency. Give examples to illustrate your
answer.
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.
