Economics 434
Theory
of Financial Markets
Mean: 79
Lowest: 44
Highest: 96
Professor Edwin T. Burton
Dynamics Building, Room 308 (but most of the
time, Professor Burton can be found at 1900 Arlington Blvd, Suite C, which is
next door to Taco Bell on the way to Barracks Rd Shopping Center)
212 731-2340 (etb6d@virginia.edu)
Office Hours: Tues/Thurs 11-12 AM
Class meets on Tuesdays and Thursdays from 9:30 AM
until 10:45 AM in the main Wilson Auditorium. From time to time classes
may be rescheduled to Sundays from 1:00 PM until 3:00 PM(or
from 2:00 PM until 4:00 PM) in the main Wilson Auditorium to make up
for regular classes that might have to be cancelled because of the professor's
traveling schedule. This is a considerable amount of reading in this
course. The required books are the following:
Reading Assignments: (you should read all of Malkiel immediately)
Wall Street Journal and NY Times Articles and other articles (and others) Sent to Class Periodically (available at toolkit)
Weeks of August 26 - September 5: Financial Market Theory: Introduction to Fixed Income, pp. 1 - 41.
Weeks of September 8 - October 30: Financial Market Theory: Modern Portfolio Theory:, pp. 42 - 79
Weeks of November 3 - November 18: Financial Market Theory: Modern Portfolio Theory, pp. 80 - 112
Week of November 20 - November 25: Financial Market Theory, pp. 113 - 138 (Also, now is the time to begin reading Money Ball, which must be read by Dec 4)
Week of December 2 - December 4: Financial Market Theory, pp 138-197 and finish Money Ball
Financial
Market Theory, 2008 Edition, by
Edwin T Burton
Random
Walk Down Wall Street, by Burton Malkiel (this book should be read first and completed
during the first few lectures in the class)
Money Ball, by Michael Lewis, W. W. Norton & Company, May
10, 2003 edition
The following books are
suggested (for those who really want to go far beyond this course):
Investment
Science, by David Luenberger [
Corporate
Finance Theory, by William L. Megginson, Addison Wesley, 1997 {good, less mathematical
treatment of modern finance, readable by most students}
Lectures:
August 26, 2008: Introduction to Economics 434 Financial Markets
August 28, 2008: Debt and Equity
September 2, 2008: Present Value; Introduction to Treasury Bill Market
September 4, 2008: The Treasury Bill Market; The Treasury Coupon Market
September 11, 2008: Lehman, Fannie, Freddie
September 16, 2008: Lehman, Merrill Lynch, AIG
September 18, 2008: The Storm Continues: MS, GS, WM
September 25, 2998: The Paulsen Plan: Pros and Cons
September 28, 2008: Treasury Coupon Issues and Duration
September 30, 2008: Duration; Introduction to the Mortgage Market
October 2, 2008: The Mortgage Market
October 7, 2008: More on the Mortgage Market; Intro to ABS
October 9, 2008: Mortgages and ABS
October 16, 2008: ABS and Review for Mid Term
October 21, 2008: First Mid Term
October 23, 2008: Introduction to Mean-Variance (Modern Portfolio Theory)
October 28, 2008: Modern Portfolio Theory I
October 30, 2008: Modern Portfolio Theory II
November 4, 2008: Modern Portfolio Theory III (The Capital Asset Pricing Model)
November 6, 2008: CAPM, Roll's Criticism, Portfolio Evaluation
November 11, 2008: Efficient Market Hypothesis and Other Issues
November 13, 2008: Wrap Up of MPT; Review for 2nd Mid Term
November 18, 2008: Second Mid Term
November 20, 2008: Modigliani Miller Theorem on Firm Leverage
November 25, 2008: More on M-M Theorems
December 2, 2008: Derivatives: Part I
(To view Office 2007 Versions of Power Point, you may
need to download the PPViewer for 2007)
A Video of Harry
Markowitz and Bill Sharpe saying hello to Econ 434 Students
There will be two mid term
examinations and one final examination,with
the final grade determined by a weighting of 30/30/40 with the final amounting
to 40 percent. The final examination is cumulative. The final examination is
scheduled for Wednesday, December 10, 2008 beginning at 2 PM and ending at 5
PM. The examination will be held in the Wilson Auditorium. No
examination may be skipped without a bona-fide excused absence (illness,
etcetera). There is no option available for missing exams.
Examination I – Tuesday, October 21st, 2008
Examination II – Tuesday, November 18th, 2008
Final Examination – Wednesday, December 10th,
2008, 2PM until 5PM in the Wilson Auditorium
Please Note: If you cannot make the
examinations as scheduled, please do not take this course. We do not give
make-up examinations. If you are unable to take the final on time as schedule,
you will, at best, receive an incomplete for this course. There are no
exceptions.
The Main Topics Covered In This Course Are:
1. Fixed Income
Markets
2. Modern Portfolio
Theory
3
Leverage, Corporate Balance Sheets, Buyouts
4. Alternative Assets