Financial Economics

This course introduces students to applied economic modeling and research. It surveys the practices and technical tools used to model economic relationships and to challenge theories by finding and testing hypotheses. In short, econometrics uses the tools of mathematical modeling and statistics to distinguish the signals of correlation and causality from noise and mere chance.Students will obtain hands-on experience applying core methods of empirical econometric analysis. Students will learn how to develop and test economic models, interpret results, and critically examine the results obtained by others. Students will improve their general reasoning, critical thinking, analytic, statistical software toolset, practice their writing and teamwork skills. Course content: OLS, difference in differences, panel data, instrumental variables, experiments, omitted variable bias.

Examination of how financial instruments are valued and traded. Investment strategies, such as active versus passive investing and constructing efficient portfolios, are explored. Students will present investment recommendations to the class (generally individual stocks or mutual funds). Students are expected to use the Internet or other sources to conduct research.

Microeconomics, also known as price theory, is the study of how individuals and firms allocate scarce resources to competing ends. The focus of price theory is the role relative prices play in the decision-making of consumers, the operation of firms, the structure of markets, and the choices of resource suppliers and employers. Throughout the semester students will learn to use economic models and optimization techniques to analyze a variety of decision-making processes, including consumer utility optimization, and producer profit maximization in the contexts of perfect competition, monopolistic competition, oligopoly, and monopoly. Students will also learn to apply price theory to the analysis of airline regulation, taxicab licensing, racial and gender discrimination, the subprime mortgage crisis, impact of liability caps on the Gulf oil disaster, etc. By the end of the semester students will master the basic tenets of price theory and will be able to use them in the analysis of empirical problems.

This course will bridge the gap between theory and practice by using computer-based modeling and forecasting to explore a variety of financial problems. It will specifically focus on using spreadsheets and other software products to analyze the impacts of financial decisions related to financial statement analysis, cash budgeting, cost of capital determination, capital budgeting, and capital structure choices. The course covers a variety of techniques, such as sensitivity and scenario analysis, optimization methods, Monte Carlo simulation, and regression analysis. The intent is for students to develop skills that will enable them to perform data analytics on a variety of tasks in financial decision-making.