Posts from — January 2008

Introduction

We’ve looked at portfolio analysis, now it’s time to take a crack at the first big model of the course., the Capital Asset Pricing Model, (CAPM), developed by Sharpe, Lintner, and others.

In this lecture, then, We’ll derive the CAPM from first principles, then show a few examples of the model in action, look at it’s history, and then ask whether CAPM is still useful.

Length: 50 mins.

Click below for slides, handouts, an excel spreadsheet to use the model, and links to further reading.

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Dear All,

Due to a small scheduling hiccup, I’ve missed our class today from 2–3 in SR3008.

All apologies.

We’ll continue from Lecture 2 on Monday at 4 in BM015, and schedule a makeup lecture then.

xkcd - A webcomic of romance, sarcasm, math, and language - By Randall Munroe

• Arthur Schram
  Professor of Experimental Economics at U. Amsterdam
  (tags: exp_econ_lab exp_econ_book)

Following our discussion yesterday I did some reading on the stimulus package announced by President Bush, and here’s something I found I’d like to share with the class.

Read it, and I’ll open up the comments section so if anyone agrees or disagrees, they can have their say.

(Why the stimulus shouldn’t stimulate you)

EC6012

The handout at the link below was produced by Conor Burke and Mark Gaffney.

Well done gentlemen, this is a fine way to start the course.

Burke_Gaffney_Standard_Deviation_Handout

Introduction

We’ve spent some time going over how market professionals see the interaction between risk and uncertainty. Now we’ll work on looking at how economists view the situation. It’s a rather strange story to tell, so we’ll tell the story using examples of pricing risky assets.

Length: 50 minutes

Click the link below for handouts and slides and links.

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Excellent post on the visualisation of financial data: check out how much value was knocked off the value of the stock market: 112 countries.

The SocGen rogue trader managed to annihilate an amount of money that surpasses the yearly output of the economy of 112 countries, among them Madagascar, Mozambique, and war-torn Afghanistan, all of which have population sizes larger than 15 million.

on [From Wolfram Blog: Losing a Country's GDP in the Financial Markets]

Introduction

In this lecture, we’ll finish off the PC model and extend it’s solution set to include expectations. What we are left with is the workhorse model of structuralist macroeconomics, onto which we can bolt on many other things, including an open economy, a growing economy, and a welfare economy.

Length: 1.5 hours.

Click the link below to download slides, handouts, and get links to further reading.

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A student wants to know how they can download my slides, as opposed to the lecture notes and handouts I give out, which are just uploaded .pdf files.

The slides are hosted by a company called slideshare, who, it turns out, have a web utility for sharing slides. Clever folk that they are, they allow streaming of slideshows and downloading of them.

Here’s how to get the slides as a .pdf you can print off:

Click anywhere in the window where the slideshow is playing. This will take you to Slideshare’s page. There you’ll see a link to ‘download file’. Click it and work away.

Here’s what that should look like, with the download option displayed in the bottom right hand corner of the screen.

Introduction

Much is made of the difference between risk and uncertainty. Most people who make the distinction have not read the book they unknowingly cite in making this distinction: Frank Knight’s classic Risk, Uncertainty, and Profit. We’ll go through the main parts of the book (whose fulltext is here, for free), and illustrate some of the points of the book with episodes from historical finance.

We’ll also talk about Herbert Simon, and the economic definition of rationality. These three concepts: risk, uncertainty, and rationality, are all used in specific ways in the modern theory of finance I’ll be showing you in a few weeks’ time, so it is best you learn them out of that context beforehand.

Length: 50 minutes.

Click the link to download the slides, handouts, etc.

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Here are the slides of a talk we gave at the Irish Pediatric Association Autumn meeting in November, 2007.

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Introduction

The traditional analysis of price determination in competitive markets is done at a microeconomic level through the supply and demand model. This model requires some modification before we can use it to understand real world markets. Making these modifications, and justifying them, is the subject of this lecture.

Length: 2 hours.

Click the link below to download slides, handouts, and links to further reading.

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• Social Research Methods
  Great Data resource, good for beginning grad students.
  (tags: Data economics health maths methodology Reference Teaching)

Introduction

Last week we saw SIM and SIMEX, and learned how to calculate the equilibrium values of this simple model.

This week, we’ll look at a model of a closed macroeconomy, which includes government money, and portfolio choice. We’ll see that it displays the ability to generate some very interesting macroeconomic phenomena.

Length: 1.5 Hours

Click the link below to download slides, handouts, homeworks, and your presentation slots.

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Introduction

Now onto the course proper. Chapter 3 of Godley and Lavoie introduces us to SIM and SIMEX, two simple (hence the name) models of a closed macroeconomy. The interesting features of this model are detailed in the handout below, and we’ll spend a lot of time this week talking through all the features of the model and solving for it with pencil and paper.

Length: 1.5 hours

Click the link below to download slides, handouts, and homeworks, and get links to further reading.

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Introduction

Currently, the theory of finance is underpinned by probability theory. To understand financial economics properly, we’ll need to spend some time talking through some elementary probability theory in the lectures and in the tutorials, which start next week (week 3).

This lecture will introduce students to the ideas of probability, histograms, distributions, and show some examples.

Length: 50 Minutes

Click the link below to get handouts, homeworks, slides, and links to further reading.

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Introduction

Stock flow consistent modeling has many advantages and disadvantages. This lecture introduces students to both using a really simple SFC model designed by Gennaro Zezza and Claudio Dos Santos.

Length: 1.5 hours

Click the link below to see handouts, homeworks, slides, and links for further reading.

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