Module FINN43415: Capital Market Development

Department: Finance

FINN43415: Capital Market Development

Prerequisites

• None

Corequisites

• None

Excluded Combination of Modules

• None

Aims

• To appreciate how to rejuvenate the financial architecture of a nation by developing its capital market and optimally structuring its underlying securities;
• To advance students’ understanding of capital markets products, their models and working mechanism;
• To explore, at an advanced level, stock screening and portfolio management processes especially under the tax heterogeneity of economic agents over their life cycle;
• To critically explore and examine compliance issues with various capital markets securities;
• To structure and price Asset Backed Securities including REITs and Green Bonds.

Content

• Capital Markets Development, Trends and Rationale;
• Issues in Capital Markets (Market Penetration, Corporate Earnings, Market Liquidity, and Limited Listings);
• Compliance issues with capital market assets;
• Equities vs. Hybrid Securities vs. Debt Instruments;
• The Equity Premium and the Risk-Free Rate Puzzles;
• Asset Location (i.e., what asset to place in taxable versus tax-deferred account) vs. Asset Allocation (i.e., what assets to apportion) in a combined portfolio to increase its overall economic efficiency;
• The breakdown of the ‘Two-Fund Separation Theorem’ (and thus the Lintner-Mossin-Sharpe Capital Asset Pricing Model) under the rivalry of taxable and non-taxable (or tax-deferred) economic agents (such as Charitable Institutions and/ or Pension Funds);
• An alternative Capital Asset Pricing Model of Lucas (Econometrica 1978) and Martin (Econometrica 2013);
• Ramification of the Efficient Market Hypothesis (EMH): Portfolio Management (Style Investing via OEICs vs. Closed-End Funds (Investment Trusts) vs. ETFs/Index Funds);
• Investing over the life-cycle (Paul Samuelson’s Life Cycle Hypothesis);
• Structured Financial Products employing Derivatives;
• Securitization of Asset Backed Securities (ABS including REITs);
• Sustainable Financing (Structure and Pricing).

Learning Outcomes

• On completion of this module, students should have:
• knowledge of how capital markets development increases economic efficiency;
• an advanced knowledge of the models and working mechanism of the products in capital markets;
• a critical appreciation of screening and indexing methods in portfolio management and the related compliancy issues over an economic agent’s life cycle;
• understand structuring of asset back securities and sustainable debt instruments.

• the ability to recognise and analyse capital market products and their relevant models to improve financial resilience;
• the ability to use their understanding of capital market to analyse the working mechanism of different instruments;
• the ability to use their understanding of finance principles to develop a comprehensive and integrated approach to the complexity of capital markets;
• the ability to identify the compliancy issues arising in different instruments of capital markets.

• Independent learning within a defined framework at an advanced level;
• Cognitive skills of critical thinking, analysis and synthesis;
• Self-awareness, openness and sensitivity to diversity in terms of people, cultures, business and management issues;
• Effective written communication skills;
• Skills of independent learning within a defined framework of study at an advanced level;
• The ability to seek out and use relevant data sources, including electronic and bibliographic sources.

Modes of Teaching, Learning and Assessment and how these contribute to the learning outcomes of the module

• Lectures convey the subject-specific knowledge and provide students with an opportunity to learn new concepts, principles and philosophies;
• Seminars enable students to consolidate, extend and apply this knowledge through exchanging views and ideas, thus developing their subject-specific skills and key skills;
• Summative assessment through assignment will test students’ knowledge and understanding of the subject-matter and their use of critical judgment and problem-solving and analytical skills.

Teaching Methods and Learning Hours

Summative Assessment

Formative Assessment:

Answers prepared by students to pre-assigned questions and readings that are presented and discussed in seminars. Students will receive individual written feedback on their contributions to seminars.

■ Attendance at all activities marked with this symbol will be monitored. Students who fail to attend these activities, or to complete the summative or formative assessment specified above, will be subject to the procedures defined in the University's General Regulation V, and may be required to leave the University