- Code ECON8037
- Unit Value 6 units
- Offered by Research School of Economics
- ANU College ANU College of Business and Economics
- Course subject Economics
- Areas of interest Economics
- Academic career PGRD
- AsPr Patrick Beissner
- Mode of delivery In Person
Second Semester 2021
See Future Offerings
This course examines the economic principles that determine the allocation of resources through time in market economies. It uses supply and demand relationships to value capital assets (or projects more generally). There is a detailed treatment of the effects of risk and taxes on capital asset prices, and the Modigliani-Miller financial policy irrelevance theorems are derived and examined in detail. The impact of modern contracting theory on our understanding of financial economics will also be discussed.
Upon successful completion, students will have the knowledge and skills to:
- be exposed to the classical finance model that underpins modern finance;
- understand how securities are priced and affected by the institutional arrangements in securities markets, including taxes and other government regulations,
- understand the role played by time, uncertainty, information and inflation in evaluating financial instruments;
- know the role played by arbitrage in finance markets and its impact on security prices;
- understand how security prices are determined in the Capital Asset Pricing Model, and the role played by the assumptions in the model;
- know the assumptions behind the the Modigliani and Miller (M-M) financial policy irrelevance theorems as basis for understanding the factors that determine the debt-equity and dividend policy choices of firms.
- understand to the role of asymmetric information in various financial markets.
- understand how contractual incompleteness can impact corporate financial decisions.
- Assessment will consist of a Final Exam, mid-semester exam(s), in-class quizzes and a project, or some combination thereof. See the course outline for details. (null) [LO null]
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Workload10-12 hours per week
Requisite and Incompatibility
Preliminary ReadingHart, O., (1995), Firms, Contracts, and Financial Structure (Clarendon Lectures in Economics), Clarendon Press.
Jones, C.M., (2008), Financial Economics, Routledge, Oxon.
Lengwiler, Y., (2006), Microfoundations of Financial Economics: An Introduction to General Equilibrium Asset Pricing, Princeton University Press, Oxfordshire and Princeton.
Tirole, J., (2006), The Theory of Corporate Finance, Princeton University Press.
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