Economics 104, Fall 2013
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, ETFs and ETNs, futures contracts, 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. By the end of the course the successful student will not only know what most of these esoteric instruments are, but also how to find their quotations online and trade them. 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 and other Media
No textbook is used for this course, although there is a book assigned for the real estate section. All of the reading material except for that book 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.
The single book assigned for this class is the recently-published story of the failure of Washington Mutual bank during the mortgage crisis, The Lost Bank: The Story of Washington Mutual - The Biggest Bank Failure in American History, by Kirsten Grind, 2012, ISBN-10: 1451617925. This book is assigned for the last large module in the class, real estate, and will be represented on the final exam (and there will be no lecture about this book). Because the book is long it might be wise to begin reading the book early in the semester, and it will be formally assigned at the fall break, weeks before the module about real estate. No matter when started, the book should be completed by December 1.
This class also uses online audio (mostly podcast) and video material, most of it linked to the reading, some of it produced by your teacher, other material downloaded. Such material is assigned with the reading as discussed below.
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 made available online. Over the course of the semester you will be asked to read more than 300 pages of material (not including the book on real estate). You should keep this material organized. You will need to refer to it when preparing for exams. In the past I suggested that students buy 3-ring binders to keep printed material organized, but if you don't want to waste paper and can keep your documents organized in online digital format (something your teacher is trying to do) then use that technique. Regardless, try to keep the material organized so that you can refer back to it when studying for exams.
High-quality color pdf versions of the lecture slides are posted for each lecture set on the Econ 104 Course Content Page. This page also has all of the online book chapters and other reading material,
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.
To see the schedule of modules, reading assignments, and exams, refer to the Econ 104 Course Calendar. 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
Do not get too far 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 enrolled after classes started you may be on the list. 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 firstname.lastname@example.org and in the main body of the text (not the subject line) write subscribe email@example.com.
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 primary email address is garyrevans (at) gmail.com or evans (at) g.hmc.edu
Good luck! Let's have some fun and learn a lot!
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