E&M 368 Financial Markets


Fall 2012

Prof. Jon A. Hooks
Rob. 103 x0530  Office Hours
MWF 10:30-11:35, Rob 406
E-mail: jhooks@albion.edu


(1)  Financial Markets and Institutions, Abridged 9th ed. Jeff Madura (ISBN-10: 0324593643, ISBN-13: 978-0-324-59364-8)

(2) A Random Walk Down Wall Street, 9th ed.,  Burton Malkiel.

Regular reading of the Wall Street Journal is required. As they arise, contemporary issues will be incorporated into the discussion and exams.

Journal articles and other readings may be placed on reserve in the library. These readings will be announced in class.


This class is an introduction to the many facets of U.S. financial markets. The focus is on how resources are efficiently transferred from those with a surplus to those with a deficit, and on the instruments which facilitate this transfer. The discussion will be divided into four major sections: (1) Financial Markets, Flow of Funds, and Financial Intermediaries; (2) Bond Markets and Interest Rate Determination; (3) Equity Markets and Market Efficiency; and (4) Derivatives.

Each section will consist of institutional information as well as important theoretical considerations. In addition, each section will consider the role of both the individual and institutional participant.

A major goal of this class is to develop the ability to analyze financial market issues in a structured, cost-benefit framework. Thus, while having institutional knowledge about markets, institutions, and instruments is necessary, so is the ability to solve analytical problems that arise in this context. To this end, our approach will focus on three goals: (1) building an institutional framework; (2) developing an understanding of major theories; and, (3) developing problem solving skills.

A final goal is to ensure that you are technologically literate. Thus, we will learn to retrieve data from the internet, and explore the ways in which technology has impacted the operations of the financial markets.


Attendance and participation in class discussions is expected of each student. If overall attendance is bad, official attendance will be taken. There will be 2-4 quizzes (25 points each), four noncumulative exams (including the "final" exam), and at least one project (an options project) and perhaps 2-3 (I will discuss this in class). The exams will be 2 hour evening exams outside of normal class time.  Project 1 is worth 50 points.  The remaining  projects will likely be worth 25-50 points (each). There will also be homework assignments from the textbook.  Some of these textbook assignments will be collected and graded (usually 10 pts each)....I will discuss this further in class. We will also have workshops in the computer lab outside of normal class time. I will offer multiple times to find one that accomodates your schedule.

Grades are assigned based on the final distribution of total points according to the following scale (grading will be discussed further in class):

93-100..... 4.0
89-92....... 3.7
85-88....... 3.3
80-84....... 3.0
75-79....... 2.7
70-74....... 2.3
65-69....... 2.0
60-64....... 1.7
55-59....... 1.3
50-54....... 1.0
< 50......... 0.0

Feel free to check with me periodically to discuss your performance to date, or to discuss any questions you have.

" College Disability Statement: If you have a disability and may require accommodations or modifications in class instruction or course-related activities, please contact the Learning Support Center (LSC) staff who can arrange for reasonable accommodations for students who provide documentation of their disability/condition. If you are presently registered with the LSC and have requested accommodations through the LSC for this semester, please plan to meet with me as early as possible to discuss the best way to implement these accommodations in this class. The LSC is located on the third floor of the Seeley Mudd library or call 517-629-0825."

" College Statement of Academic Integrity: As an academic community, Albion College is firmly committed to honor and integrity in the pursuit of knowledge. Therefore, as a member of this academic community, each student acknowledges responsibility for his or her actions and commits to the highest standards of integrity. In doing so, each student makes a covenant with the college not to engage in any form of academic dishonesty, fraud, cheating, or theft." Faculty members may indicate penalties for academic dishonesty in the syllabus. Faculty members may also wish to reference the full policy in the on-line Catalog (see Academic Regulations) and on-line Student Handbook.

************ These requirements may be amended with notice *************

Click HERE for the EM368 Course Outline

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