EC4024, Financial Economics 2014

Instructors: Dr Stephen Kinsella and Dr Antoine Godin

Contact:, phone +353 61 23 3611. Office hours 10-1. Wednesdays. No need to make an appointment, just show up. If you need to send me an email please see my email policy first. No I'm not kidding about that., Office hours TBA.

Introduction. The charts at these links show the Dow Jones (^DJI) against the Irish Stock Exchange (^ISEQ) and the S&P 500 (^GSPC) over the last 5 years. I don't need to tell you something has gone very wrong in world financial markets, and some things may be going right. This module will help you understand some of the reasons behind these large destructions of wealth.

Learning Objectives. This module is firstly an introduction to the point of finance, to the ends finance gets taken to. Secondly, we would like you to have a sense of how finance and the financial industry connects to the real economy, especially during times of crisis. Third, I'd like you to see some simple financial models of innovation, microfinance, credit defaults and high frequency trading.

Module Organisation. The module will be divided roughly in two. First, Dr Kinsella will lay out the basics of financial economics, and from weeks 7-11 Dr Godin will work on applications.

Assessment.  You'll write a project for me, due on the Monday of Week 5 worth 40%. Here are the project details. A template file for the data project is here. Feedback will be given on all submitted projects through Turnitin, the module's Turnitin coordinates for 2013's class are: Class id: 7470037, Password: EC40242014. Guidance on Turnitin will be provided in Tutorials. KBS grading bands are here. Late projects will incur a 99% late penalty for each day of lateness. There will be a final exam worth 60% of your grade. A sample exam will be provided in week 9. The final exam will be 2.5 hours, with 10 short questions, and 3 from 7 long questions. All the tutorial resources you need are here. 

Here is the sample exam for the module

Administration We will give out handouts during certain lectures. Recommended readings by lecture are below each heading as .pdfs or are housed as ebooks within the library catalogue. All projects will be checked with Turnitin. Tutorials from Weeks 2 to 5 will focus on preparing you for the project submission. Weeks 6 to 11 will focus on getting the theoretical tools of finance properly under your belts. You can't critique something you don't understand. Also, read the works of respected market practitioners. It's important to place the theoretical views we study here in their current context. For example, the maths for debt sustainability can be very boring, unless you realize getting things wrong could result in real world misery for a lot of people.

Lecture by Lecture guide.

1. What is the purpose of finance? What is the market? (Lecture notes)

2. Macro/Finance/Regulation, IS-MP, and Regulation theory (Lecture notes)

3. Banking/Regulation/Crises: Minsky and Balance Sheet Recessions. (Lecture Notes)

4. ECB, Ireland, and EMU: Bond Markets as king makers (Lecture Notes)

5. Cross Border Capital flows: leverage, liquidity and crises (Lecture Notes)

6. Zombie theories of finance (Lecture Notes)

7. Finance, Innovation and growth: Schumpeter vs Romer. A case of technological change (AG's Lecture notes)

8. Finance and Development: 1 Microfinance: holy grail of development finance? (AG's Lecture Notes)

9. Finance and Development 2: Swaps and CDS as a good thing? (AG's Lecture Notes)

10. Algorithmic trading, high frequency finance: the case of the flash-crash

  • Arnuk, Sal and Joseph Saluzzi (2012), Broken Markets, Chapters 2 and 10.
  • Tarun Chordia, Amit Goyal, Bruce N. Lehmann, Gideon Saar (2013) High-frequency trading, Journal of Financial Markets 16(4).

11. Ethical Finance: doing good and making money at the same time? (Lecture Notes)

12. Recap.