Economics of Financial Markets

The subject is a combination of principle and practice. It provides an overview of the economic principles governing financial markets; then provides insights into some important empirical and practical issues concerning the operation of financial markets; and concludes with a discussion of some practical issues associated with Australian financial markets.

• 1Explain and analyse the role of capital markets in consumption and investment decision-making under conditions of certainty and uncertainty
• 2Explain how economic theory applies to financial markets
• 3Describe how economic theory can provide testable restrictions on financial data
• 4Analyse the main empirical results that have been established for financial markets
• 5Critically evaluate economic policy issues associated with financial markets
• 6Synthesise different theories and ideas, such as alternative models of asset pricing and portfolio allocation
• 7Apply theories to the real world - how the shape of yield curves can be used to forecast inflation in Australia for example
• 8Evaluate the relevance of competing theories. For instance, the extent to which alternative analyses can be used to predict the market price of different countries