FINN43415: Capital Market Development

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• To appreciate how to rejuvenate the financial architecture of a nation by developing its capital market and optimally structuring its underlying securities;
• To advance students understanding of capital markets products, their models and working mechanism;
• To explore, at an advanced level, stock screening and portfolio management processes especially under the tax heterogeneity of economic agents over their life cycle;
• To critically explore and examine compliance issues with various capital markets securities;
• To structure and price Asset Backed Securities including REITs and Green Bonds.

• Capital Markets Development, Trends and Rationale;
• Issues in Capital Markets (Market Penetration, Corporate Earnings, Market Liquidity, and Limited Listings);
• Compliance issues with capital market assets;
• Equities vs. Hybrid Securities vs. Debt Instruments;
• The Equity Premium and the Risk-Free Rate Puzzles;
• Asset Location (i.e., what asset to place in taxable versus tax-deferred account) vs. Asset Allocation (i.e., what assets to apportion) in a combined portfolio to increase its overall economic efficiency;
• The breakdown of the Two-Fund Separation Theorem (and thus the Lintner-Mossin-Sharpe Capital Asset Pricing Model) under the rivalry of taxable and non-taxable (or tax-deferred) economic agents (such as Charitable Institutions and/ or Pension Funds);
• An alternative Capital Asset Pricing Model of Lucas (Econometrica 1978) and Martin (Econometrica 2013);
• Ramification of the Efficient Market Hypothesis (EMH): Portfolio Management (Style Investing via OEICs vs. Closed-End Funds (Investment Trusts) vs. ETFs/Index Funds);
• Investing over the life-cycle (Paul Samuelsons Life Cycle Hypothesis);
• Structured Financial Products employing Derivatives;
• Securitization of Asset Backed Securities (ABS including REITs);
• Sustainable Financing (Structure and Pricing).

Subject-specific Knowledge:

• On completion of this module, students should have:
• knowledge of how capital markets development increases economic efficiency;
• an advanced knowledge of the models and working mechanism of the products in capital markets;
• a critical appreciation of screening and indexing methods in portfolio management and the related compliancy issues over an economic agents life cycle;
• understand structuring of asset back securities and sustainable debt instruments.

Subject-specific Skills:

• the ability to recognise and analyse capital market products and their relevant models to improve financial resilience;
• the ability to use their understanding of capital market to analyse the working mechanism of different instruments;
• the ability to use their understanding of finance principles to develop a comprehensive and integrated approach to the complexity of capital markets;
• the ability to identify the compliancy issues arising in different instruments of capital markets.

Key Skills:

• Independent learning within a defined framework at an advanced level;
• Cognitive skills of critical thinking, analysis and synthesis;
• Self-awareness, openness and sensitivity to diversity in terms of people, cultures, business and management issues;
• Effective written communication skills;
• Skills of independent learning within a defined framework of study at an advanced level;
• The ability to seek out and use relevant data sources, including electronic and bibliographic sources.

• Lectures convey the subject-specific knowledge and provide students with an opportunity to learn new concepts, principles and philosophies;
• Seminars enable students to consolidate, extend and apply this knowledge through exchanging views and ideas, thus developing their subject-specific skills and key skills;
• Summative assessment through assignment will test students knowledge and understanding of the subject-matter and their use of critical judgment and problem-solving and analytical skills.

Answers prepared by students to pre-assigned questions and readings that are presented and discussed in seminars. Students will receive individual written feedback on their contributions to seminars.

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