ECON5421 FINANCIAL ECONOMICS

This course provides the economic foundation of modern asset pricing theory. It serves as an introduction to the functioning of the financial market as an efficient venue for financing investment activities. Various issues on risk measurement, risk assessment, managing risk, investors' psychological attitudes towards risk, and its implications on consumption and portfolio decision making in an uncertain world will be introduced and discussed. In-depth treatment will be given to the classical Markowitz's mean-variance analysis, CAPM, multi-factor asset pricing theory and no-arbitrage asset pricing theory as cornerstones of modern finance.