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(a) Compare and contrast key role and functions of the capital markets with those of the money markets.

  • Faculty of Business and Law
  • BA (Hons) Accounting and Finance
  • Module Code: APC 313
  • Module Title: Financial Markets
  • ASSIGNMENT BRIEF FOR JL9 –TERM 2 -2021/22

 

LEARNING OUTCOMES

Upon successful completion of this module, students will be able to:

Knowledge-based outcomes:

  • Explain the operation of financial markets and understand their importance.
  • Explain key theories and models of financial markets including the efficient market hypothesis, and understand key implications.
  • Analyse the operations and the efficiency of financial markets

Skill-based outcomes:

  • To identify and collect appropriate financial data and indices including share prices to carry out analysis of operations and efficiency of financial markets.

This assessment is in four (4) parts. Please answer all elements.

Assessment weight: 100% of the module Assessment Criteria:

  1. Evidence of background reading and relevance of the material to the question posed.
  2. Appropriate use of up-date Harvard referencing system.
  3. Depth of analysis based on relevant academic literature, empirical evidence, relevant financial charts, and financial data analysis.
  4. Appropriate conclusion-based on integration of literature with financial data and analysis.

Please note that this is an individual assignment and the policy of the University on “Policy on Cheating, Collusion and Plagiarism” applies.

Question 1:

  • Compare and contrast key role and functions of the capital markets with those of the money markets. (10 marks)
  • Critically explain how Quantitative Easing (QE) by the Bank of England in recent years, via open market operations in the money markets, has impacted bond and stock, prices including housing prices in the capital markets in the United Kingdom. (Please include recent financial charts and tables to support your analysis). (20 marks)

Question 2:

  • Distinguish between different levels of financial market efficiency. Give examples to illustrate your answer. (10 marks)
  • With close reference to the efficient market hypothesis (EMH) literature and by using relevant empirical evidence of data and graphical analysis of stock prices and daily stock returns, for a selected 90-day period, critically assess the” efficiency” of London Stock Exchange (LSE) market in recent years. Explain the implications of your results. (Please see Guidance and Preparation Note below for further information). (20 marks)

Question 3:

  • With close reference to recent movements in UK Pound/US Dollar spot exchange rate, critically discuss main causes of exchange rate volatility in the foreign exchange markets. (Use relevant financial data and charts to illustrate your answer). (10 marks)

Question 4:

  • Critically explain each one of the following financial terms: i. Asymmetric information ii. Moral hazard iii. Adverse selection Give examples in each case to illustrate your answer. (15 marks)
  • Making references to asymmetric information, moral hazard and adverse selection, critically discuss why financial markets should be regulated.(15 marks)

Guidance and Preparation Note:

  • Overall word limit, excluding tables, charts, and graphs, is between 3000-3500 words.
  • Each question should be answered with clear reference and citation to key published academic literature and relevant financial data and evidence.

For Question 2(b) you need to:

  • briefly review key academic literature on EMH and the London Stock Exchange market, and
  • carry out your own financial data analysis based on graphical analysis of movements in daily share/stock prices of ONE FTSE listed company of your own choice OR FTSE all-share price index, over a 90-day period to arrive at a conclusion.
  • Please include graphs/charts in the main text and your data tables in an appendix. Submission Guidance Your submission will be on your module space on Canvas. Please refer to the ‘General Assessment Guidance’ under the Assignment tab, for detailed instructions on how to submit and how to check for your marks and feedback. Grading Your mark and feedback will be made available to you electronically once the internal moderation has taken place, which is after 4 weeks from your submission deadline.

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