Economics and Finance

Readings/Bibliography

• 
  Mishkin, F. (2013) “The Economics of Money, Banking and Financial Markets”, Pearson, 10°
  
• 
  The Monetary Policy of the ECB, Editore: BCE, 2011
  
• 
  “Global Economics View, Looking into the Deep Pockets of the ECB”, W.Buiter e E. Rahbari, Citigroup Global Markets, 27 February 2012
  
• 
  Global Economics View, Why Does The ECB Not Put Its Mouth Where Its Money Is? The ECB As Lender Of Last Resort For Euro Area Sovereigns And Banks”, W.Buiter e E. Rahbari, Citigroup Global Markets, 27 February 2012.
  

At the end of the course, students will have a basic knowledge of the tools of experimental economics and of the main results produced during the last three decades of research in experimental and behavioral economics.

During the last three decades, economics has been progressively permeated by behavioral considerations. Researchers have investigated whether and under which conditions theoretical models are able to predict how people actually make decisions. When a detachment between the theoretical predictions and the observed behavior emerged, new models have been proposed, aimed at an increase of the descriptive accuracy, which preserved the analytical tractability. The process gave rise to completely new streams of literature, in the fields of game theory, law and economics, finance, and industrial organization. The empirical approach adopted in behavioral economics is largely based on laboratory experiments, aimed at studying behavior in markets, games and other strategic situations, under strictly controlled environmental conditions.

This course is designed to offer an introductory overview both of the tools adopted, and of the most established results that have emerged within this broad strand of literature.
Readings/Bibliography

Holt, Charles A. “Markets, games, and strategic behavior: recipes for interactive learning”, Pearson Addison Wesley, 2006.

Teaching will combine participation in mock-experiments, active classroom learning exercises, and traditional lecturing.

Assessment of students will be based on one short essay on a topic of their choice, among those discussed in the course (40% of the module’s final mark), plus a final exam (60% of the module’s final mark) which will include a set of questions covering both the mathematical/analytical aspects of the models discussed in class and their interpretation. In the final exam students may use calculators (but not other electronic devices), but they may not consult notes, books, or other written material (including their classmates' exam papers).

During the course, students will be involved in mock experiments, which should provide them with a more vivid idea of the issues to be examined later during the lecture, and active participation to the in-class discussion will be encouraged.

http://www.unibo.it/docenti/maria.bigoni

http://www2.dse.unibo.it/bigoni
Office hours

See the website of Maria Bigoni

• 
  Behavioral Economics
  
• 
  Economic Analysis
  
• 
  Financial Instruments and Financial Markets
  

The course areas of interest are: (i) economic systems and reduction of complexity: introduction to economic analysis; (ii) paradigms of economic theory; (iii) economic theories and institutional assumptions: separation theorems; (iv) connections, social norms, institutional set-ups.

Lectures follow the syllabus below:

1. Economic systems and reduction of complexity

2. Paradigms of economic theory: overview and introduction to pure production and pure preference models

3. Pure preference models

4. Pure production models

5. Economic theory and institutional assumptions: separation theorems

6. Connections, social norms, institutional arrangements
6.1 Connections and networks
6.2. Institutional arrangements and co-ordination criteria
6.3. Co-ordination and social norms
6.4. Co-ordination and the institutions of production

Teaching includes research seminars by Antonio Andreoni (SOAS, University of London, and Institute of Manufacturing, Cambridge), Ivano Cardinale (Emmanuel College and Judge Business School, Cambridge), Enrico Petracca (University of Bologna), and Andrea Carlo Lo Verso (University of Bologna).

Classwork is an essential component of the course. Students will be required to comment on selected topics of economic literature. Topics for classwork will be assigned at the beginning of the course.

Readings/Bibliography

Topic 1:

*H. Simon, ‘The Architecture of Complexity', Proceedings of the American Philosophical Society, vol. 156, n. 6, December, 1962, pp. 122-137. (Italian translation with comments: H. Simon, 'L'architettura della complessità', in Informazione e studi di progettazione ambientale, n. 5, Istituto universitario di architettura di Venezia, anno accademico 1970-71.)

H. Simon, ‘Near decomposability and the speed of evolution', Industrial and Corporate Change, 2002, 11 (3), pp. 587-99.

Loasby, Choice, Complexity, and Ignorance: an Enquiry into Economic Theory and the Practice of Decision-making, Cambridge, Cambridge University Press, 1976, pp. 29-57.

Topic 2:

*L.L. Pasinetti, ‘Theory of Value-a Source of Alternative Paradigms in Economic Analysis', in M. Baranzini and R. Scazzieri (eds), Foundations in Economics. Structures of Inquiry and Economic Theory , Oxford and New York, Basil Blackwell, 1986, pp.409-31.

*J. Hicks, ' "Revolutions" in Economics', in S.J. Latsis (ed). Method and Appraisal in Economics, Cambridge, Cambridge University Press, 1976, pp. 207-18.

*A.Quadrio Curzio and R. Scazzieri, 'The Exchange-Production Duality and the Dynamics of Economic Knowledge', in M.Baranzini and R. Scazzieri (eds), Foundations of Economics. Structures of Inquiry and Economic Theory, Oxford and New York, Basil Blackwell, 1986, pp. 377-407.

Topic 3:

*V.L. Smith, Rationality in Economics. Constructivist and Ecological Forms, Cambridge, Cambridge University Press, 2008, pp. 1-42.

*H. Simon, Reason in Human Affairs, Stanford, Stanford University Press, 1983.

*A. Sen, ‘Maximization and the Act of Choice', Econometrica, vol. 65, No. 4 (Jul., 1997), pp. 745-779.

P. Suppes, ‘The Limits of Rationality', Grazer Philosophische Studien, 12/13, pp. 85-101, (in Collected Works of Patrick Suppes, Section III (Methodology, Probability and Measurement), http://suppes-corpus.stanford.edu/article.html?id=22)

P. Suppes, ‘Rationality, Habits and Freedom', in N. Dimitri, M. Basili and I. Gilboa (eds), Cognitive Processes and Economic Behavior. Proceeding of a Conference held at Certosa di Pontignano, Siena, Italy, July 3-8, 2001, pp. 137-67 (in Collected Works of Patrick Suppes, Section III (Methodology, Probability and Measurement), Stanford, http://suppes-corpus.stanford.edu/article.html?id=394).

P. Suppes, ‘The Good and the Bad, the True and the False', in M.C. Galavotti, R. Scazzieri and P. Suppes (eds), Reasoning, Rationality and Probability, Stanford, CSLI Publications, 2008, pp. 13-35. 67 (in Collected Works of Patrick Suppes, Section III (Methodology, Probability and Measurement), Stanford, http://suppes-corpus.stanford.edu/article.html?id=425).

Gigerenzer, G. and Selten, R., eds., Bounded Rationality: The Adaptive Toolbox, Cambridge, Mass., MIT Press, 2001.

Byron, M., ed., ‘Introduction', in M. Byron (ed), Satisficing and Maximizing. Moral Theorists on Practical Reason, Cambridge, Cambridge University Press, 2004, pp. 1-13.

Topic 4:

* L.L.Pasinetti, Lectures on the Theory of Production, New York Columbia University Press, Londpn, Macmillan, 1977, Chapters II and III.

*L.L. Pasinetti and R. Scazzieri, ‘Capital Theory: Paradoxes', in The New Palgrave Dictionary of Economics. Second Edition (eds S. N. Durlauf and L. E. Blume), London, Palgrave Macmillan, 2008; The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. http://www.dictionaryofeconomics.com/article?id=pde2008_C000042 .

*R. Scazzieri, A Theory of Production. Tasks, Processes and Technical Practices, Oxford, Clarendon Press, 1993, pp. 27-33, and pp. 83-101.

Topic 5:

*L. L. Pasinetti, ‘The stage of pure economic theory', in L.L. Pasinetti, Keynes and the Cambridge Keynesians. A ‘Revolution in Economics' to be Accomplished, Cambridge, Cambridge University Press, pp. 274-304.

R. Scazzieri, ‘The Feasibility of Normative Structures', in M.C. Galavotti, ed., Bruno de Finetti: Radical Probabilist , London, College Publications, 2009, pp. 129-152.

Topic 6:

*N. Georgescu Roegen, ‘The institutional aspects of peasant communities: an analytical view', in N. Georgescu-Roegen, Energy and Economic Myths, New York, Pergamon Press, pp. 199 - 231.

R. Burt, Structural Holes. The Social Structure of Competition, Cambridge, Massachusetts, Harvard University Press, 1995.

*R. Scazzieri, ‘Context, congruence and co-ordination', in M.C. Galavotti, R. Scazzieri and P. Suppes, eds., Reasoning, Rationality and Probability, Stanford, CSLI Publications, 2008, pp.187-207.

M. Landesmann and R. Scazzieri, ‘The production process: description and analysis', in M. Landesnmann and R. Scazzieri (eds.), Production and Economic Dynamics, Cambridge, Cambridge University Press,1996, pp. 191-228.

M. Landesmann and R. Scazzieri, ‘Coordination of production processes, subsystem dynamics and structural change', in M. Landesmann and R. Scazzieri (eds.), Production and Economic Dynamics, Cambridge, Cambridge University Press,1996, pp. 304-43.

*A. Andreoni and R. Scazzieri, ‘Triggers of Change: Structural Trajectories and Production Dynamics', Cambridge Journal of Economics, 38, 2014, pp. 1391-1408.

R. Scazzieri, M.L. Baranzini and C. Rotondi, 'Resources, Scarcities and Rents: Technological Interdependence and the Dynamics of Socio-Economic Structures', in M.L. Baranzini, C. Rotondi and R. Scazzieri (a cura di), Resources, Production and Structural Dynamics, Cambridge, Cambridge University Ptess, 2014, pp. 427-84.

*I. Cardinale, 'Sectoral Interests and "Systemic Interests": Towards a Structural Political Economy of the Eurozone", in I. Cardinale. D. Coffman and R. Scazzieri (eds), The Political Economy of the Eurozone, Cambridge, Cambridge University Press, 2016.

*A. Pabst and R. Scazzieri, 'The Political Economy of Civil Society', Constitutional Political Economy, 2012 (4, December), pp. 337-56.

I. Cardinale, D. Coffman and R. Scazzieri, 'Framing the Political Economy of the Eurozone: Structural Heuristics for Analysis and Policy' , in I. Cardinale, D. Coffman and R. Scazzieri (eds), The Political Economy of The Eurozone, Cambridge, Cambridge University Press, 2016.

 

Teaching methods

Critical survey of the literature, analysis of core theoretical models, identification and discussion of interpretive frameworks

Assessment methods

Exam component I: Internal 2-stage coursework assessment with final evaluation;

Exam component II: Paper presentation in the Laboratory of Economic Analysis on a topic and bibliography preliminarily agreed with the Lecturer and subsequent submission of research paper (4,000 to 5,000 words) on the same topic.

Students unable to attend the Laboratory of Economic Analysis are asked to satisfy the requirements of Exam component II by submitting two research papers (approximate length: 4,000 to 5,000 words) on topics and bibliographies preliminarily agreed with the Lecturer.

Formal lectures and classes. Active participation in discussion and classwork is required.

See the website of Scazzieri Roberto

On completion of this course, students will know about the main types of product used in the financial markets, such as debt and equity tools both in retail and wholesale markets, and their risk-reward properties. Students will also command a critical and theoretical knowledge of financing decisions, the different financial instruments, and how these allow to meet players’ needs from the point of view of firms and of institutional investors.

• 
  Mechanics of different financial instruments for raising and investing funds from the view point of different users.
  
• 
  Concepts of Time Value of Money, “required rate of return”.
  
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  Cash Capital Market Instruments and the functioning of major physical capital markets.
  
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  Yield Curve and Market-Determined Interest Rates.
  
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  Bond Markets.
  
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  Equity markets.
  
• 
  Derivative Instruments.
  
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  Commodities and other asset classes.
  

Handouts and material from manuals on Capital Markets Instruments.

Class teaching with students’ active participation. Case studies and “hands-on” activities by students.

Exam, problem sets and performance at “hands-on” activities.

Traditional plus analysis with spreadsheets and financial software.

TBA
Office hours

See the website of the instructor.

81794 - FINANCIAL ECONOMICS

Prof. Vincenzo Denicolò

Credits: 8, 60 class hours
Learning outcomes

This course helps you develop a way of thinking on how individuals make choices among investment alternatives. We will explore the design of optimum portfolios of securities in an uncertain environment and the measurement of their performance over time. Further, the role of FX dynamics in internationally integrated markets and derivatives instruments in managing risk will also be discussed. This is not meant to be a 'get-rich-quick' course. It proposes solutions and techniques subjected to real-world data and particular attention will be given to the provision of lasting conceptual frameworks, useful to analyze new ideas and future challenges in the investment environment.

• Introduction, course outline

• Taxonomy of securities and markets

• Risk and return

Portfolio analysis and diversification

• Portfolio diversification

• Portfolio analysis: 2 assets

• Portfolio analysis: many assets

Investors’ preferences

• Mean-variance optimization

• Investors’ preferences and optimal portfolios

Implementation of portfolio theory

• The Single index Model

Equilibrium

• The Capital Asset Pricing Model

Equilibrium

• Multi-factors models (Fama-French)

• Arbitrage Pricing Theory

Security analysis: equities

• Equity valuation

• Present value models

• Macroeconomic, industry and company analysis

Security analysis: bonds

• Bond prices and yields

• Duration and convexity

• Term structure of interest rates

Performance measurement and international portfolio management

• Measuring investment returns

• Conventional measures of investment performance

• International diversification

Active portfolio management

• On the Efficient Markets Hypothesis (EMH): introduction

• Treynor-Black model

Readings/Bibliography

The main textbook is Bodie, Z., Kane, A. and Marcus, A. J. (2011), Investments and Portfolio Management, 9th edition, McGraw-Hill.

A supplementary book is Elton, E.J., Gruber, M.J., Brown, S.J. and Goetzmann, W.N. (2003), Modern Portfolio Theory and Investment Analysis, 6^th edition, Wiley.

Additional readings may be recommended in class.

Lectures
Assessment methods

The overall course grade will be computed on the basis of the following scheme:

Final examination: 80%

Coursework: 20%

The final exam will comprise both analytical exercises and an essay. The final exam will focus on concepts discussed during the whole course.

The coursework comprises two sections, one containing exercises and the other a short essay. Each section counts for 10% of the final mark.

The coursework is due by the end of week 9 (the exact deadline will be specified in due course), and will be handed out one week in advance.

See the website of the instructor.

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 Modules of future activation
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DEVELOPMENT: ECONOMICS AND FINANCIAL MARKETS

Module summary:

The objective of this module is to provide students with analytical and empirical tools that enable them to understand the functioning of financial markets and institutions in developing countries. The module will first cover issues such as political institutions, corruption, property rights and the contractual structure in agriculture. Then we will take a more micro view and discuss topics more closely connected to the functioning of financial markets and access to financial services in less developed countries, such as credit market imperfections, microfinance contracts, formal and informal insurance and access to saving products. For each major topic covered we want to derive testable implications from the theory, subject these to empirical testing and draw out policy conclusions.

Module outcomes: 

By the end of the module students should have achieved the following:

(a) acquired an enhanced empirical knowledge of economic conditions in low and middle income economies;

(b) acquired an understanding of the functioning of financial markets in developing countries;

(c) consolidated the understanding of those elements of basic economic theory which we apply to the problems of development and financial markets;

(d) acquired an understanding of the main theoretical results and empirical methods that are used by the profession to study developing countries;

 

Textbooks: