Module: Financial Theory

Module Specifications.

Current Academic Year 2024 - 2025

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Date posted: September 2024

Module Title	Financial Theory
Module Code	EF306 (ITS) / FBA1008 (Banner)
Faculty	DCU Business School	School	DCU Business School
Module Co-ordinator	Liam Gallagher
Module Teachers	-
NFQ level	8	Credit Rating	5
Pre-requisite	Not Available
Co-requisite	Not Available
Compatibles	Not Available
Incompatibles	Not Available

None
Array

Description

The aim of this course is to provide students with a thorough foundation in the principles of financial theory and to develop a critical approach to the discipline. This starts with utility theory and risk-return relationship with different risk measures. Students will develop an understanding of portfolio diversification leading to the development of the Capital Asset Pricing Model as well as an investigation of the arbitrage prcing theory. Students will also explore the more recent developments including the development of the Fama-French three factor model and behavioural finance.

Learning Outcomes

1. describe and use fundamental principles and concepts in finance
2. appraise the relationship between risk and return
3. examine the pricing of assets
4. use key skills in financial decision making
5. critically assess financial theories and models

*Type*	*Hours*	*Description*
Workload	Full-time hours per semester
Lecture	24	No Description
Independent Study	24	Assigned readings
Independent Study	24	Problem sets
Assignment Completion	13	Preparing for Individual Assignment Case Study
Independent Study	40	Exam preparation
Total Workload: 125

All module information is indicative and subject to change. For further information,students are advised to refer to the University's Marks and Standards and Programme Specific Regulations at: http://www.dcu.ie/registry/examinations/index.shtml

Indicative Content and Learning Activities

Utility theory
Basic axioms of utility theory, indifference curves, certainty equivalents, risk-reward trade-off and the concept of risk aversion.

State Preference Theory
Optimal portfolio decisions, portfolio optimality conditions and Fisher Separation.

Mean-Variance uncertainty
Measuring risk and return for a single asset and portfolio of assets. Optimal portfolio choice with risky assets and the risk-free rate of interest.

Asset Pricing
Capital Asset Pricing Model and Arbitrage Pricing Theory. Efficiency of the market portfolio, Beta, systematic and unsystematic risk. Behavioural Finance

Efficient Capital Market Theory
Random walk model, categories of efficiency, empirical review, Behavioral Finance , technical analysis.

Assessment Breakdown
Continuous Assessment	30%	Examination Weight	70%

Type	Description	% of total	Assessment Date
Course Work Breakdown
Assignment	Individual Assignment - Case Study	30%	Week 7

Reassessment Requirement Type
Resit arrangements are explained by the following categories: Resit category 1: A resit is available for both* components of the module. Resit category 2: No resit is available for a 100% continuous assessment module. Resit category 3: No resit is available for the continuous assessment component where there is a continuous assessment and examination element.
* ‘Both’ is used in the context of the module having a Continuous Assessment/Examination split; where the module is 100% continuous assessment, there will also be a resit of the assessment
This module is category 1

Indicative Reading List

Bodie, Z., A. Kane and A. Marcus: 2008, Investments, 7th edition, Irwin McGrawHill, 978-007-126310-8

Other Resources

None