Financial Economics
Economics 104, Fall 2011
Course Outline
This is an introductory course in financial economics designed to give students first-time detailed exposure to the wide variety of financial instruments (assets and debt instruments) and the financial markets in which they are traded. In this course you learn about stocks, options, real estate, yield-bearing financial assets like bonds and notes, the money market, mutual funds, the markets in which these are traded, various statistics, indices, quotations and listings that pertain to these instruments, and theories about why these financial instruments perform as they do.
The course blends descriptive and theoretical material.
By descriptive I mean that a considerable part of the course is dedicated to merely describing what these assets and institutions are and how they are used. The course has a very practical orientation in that sense. By the end of the course the successful student will not only know what most of these esoteric instruments are, but also how to trade them and how to find their quotations online. In the section devoted to real estate, students will be shown, among other things, how to buy a house - including qualifying, selecting the right type of loan, and going through escrow, and avoiding the kinds of problems that have plagued real estate in recent years.
In the theoretical part of the course you will explore interest rate and yield formulas, theories of interest rate determination, portfolio and risk theories, and general theories of financial asset price determination.
My secondary objective in this course is to encourage the student to think about and develop financial goals and to develop the means to satisfy those goals.
This course is demanding. Thought the material is not difficult, students are given a large amount of material and a lot of work to do, and are expected to do it. This course, which is taught modular style (allowing the presentation of large amounts of material quickly), presents a steady stream of material throughout the semester. If you fall behind, it's hard to catch up.
Reading Material
No textbook is used for this course. All of the reading material for this course is obtained free from the internet (including a lot that I have written), and the links to these assignments are provided elsewhere in the class material.
All students enrolled in the class will be required to get a guest account at http://finance.yahoo.com and http://finance.google.com/. You will be asked to set up a simulated trading portfolio of stocks, mutual funds, and options, and to track them daily.
Class Handouts and Homework Assignments and the Homework Folio
We rely very heavily on written material given out in class. Over the course of the semester you will receive more than 300 pages of material. You should keep this material organized. You will need to refer to it when preparing for exams. I suggest that you either (a) buy two 2" 3-ring binders for use in this class; one for keeping class handouts (about 200 pages of material) and one for keeping internet-based reading assignments (about 100 pages of material), or (b) keep an organized collection of this material online in the form of pdf documents that you can easily access for study.
High-quality color pdf versions of the handouts are posted for each lecture on the website http://www2.hmc.edu/~evans/e104ls.htm. If you miss class for any reason, you should print copies of the handout from this page. Note: Because of high reproduction costs, the online versions of the handouts are of much higher quality than those given out in class.
I will also assign homework throughout the semester. The homework assignments tend to be of two sorts: tracking the performance of selected financial assets (like a stocks, bonds, and mutual funds) and making calculations on yields, rates of return, and so forth. The homework will not be graded nor even collected as the class proceeds (though I reserve the right to change my mind about that if I feel that people are not doing the homework). You are required to keep your completed homework because you will need some of it to take exams.
The course calendar for this class is posted on the following web site: http://www2.hmc.edu/~evans/e104cc.html
. This web page also has links to the reading assignments. Because I try to use reading material that
is very topical, including some material that I write and update every
semester, links to the reading material assigned to each module are only made
available just before the module begins
The assignments for this class are posted on the following web site: http://www2.hmc.edu/~evans/e104ca.html
Do not get ahead in these assignments because some of the material is added as the course proceeds, and some homework information and reminders are sent out to the class master list by email. Therefore, please make sure that you are on this list! If you are a Harvey Mudd student and you registered for the class last fall, you are already on the list. If you are a student from another campus or sign up for the class after registration, you probably are not subscribed. Early in the first week I will send out an email check to all of you after announcing it in class, so wait until I do that before you panic. If you are not on the list, then subscribe automatically by writing to listkeeper@hmc.edu and in the main body of the text (not the subject line) write subscribe econ-104-l@hmc.edu.
Examination and Grades
In this class I give three examinations including the final. All are equally
weighted. The scheduled dates for the exams are shown in the course calendar.
For the final grade I sum the numeric scores of the three exams and assign a
letter grade based upon your placement in the total. Your grade will depend
entirely upon the final distribution for all students for all three exams at
the end of the semester and by no other criteria.
It is easy to make mistakes when grading exams. You have the right to appeal a grade on an exam so long as the following procedure is used:
To appeal a grade on an exam, you must submit to me the basis of your complaint (explaining why you should have been given a higher score) in writing on an 8 1/2" by 11" sheet of paper within a week of receiving back your graded exam. I will be willing to talk to you at length about your exam, but not about changing the score on your exam, unless you have first followed the procedure above.
To this rule I make one exception: if I have improperly posted your grade because I made a mistake adding the score, you need only tell me.
Policy on Pass/No Pass: I automatically allow any student who wishes to
take the course on a P/NP basis to do so if the student is eligible. HOWEVER,
to receive a passing grade the student must have accumulated enough points
to receive the equivalent C- or better!
Prior to the final, do not ask me how many points you must earn on the final to
pass. I will not tell you because I will not know. Your final grade will depend
upon the final distribution after the final has been taken.
How to Contact Me
My office hours are on Tuesday and Thursday at 2:45 to 4:00. If you merely drop by there is a good chance you will find me.
I do make appointments - that way we can meet at a time convenient to both of us. The best way to make an appointment is by email. If you ask after class and I don't have my calendar with me, I might forget! My email address is garyrevans (at) gmail.com
Good luck! Let's have some fun and learn a lot!
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