Quality Management

Economics and the Equity Market

USD 15.00
instructor
Instructor
Alan Fata, DBA
Category
Strat. & Busn. Mngt
Difficulty
Medium
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Economics encompasses two broad subjects: macroeconomics and microeconomics. Macroeconomics deals with an economy in aggregate and addresses issues such as inflation, unemployment, interest rates, and economic growth. We present a macroeconomic perspective in Chap. 3. Microeconomics, the focus of this chapter, operates, as its name indicates, on the micro level, addressing household consumption decisions and the production decisions of firms. In this course, we focus on the parallels (and a few differences) between a standard microeconomics formulation (a household’s selection of an optimal consumption bundle) and a standard finance model (an investor’s selection of a portfolio that optimally combines a riskless asset – cash – and a risky equity portfolio). The finance formulation is the Capital Asset Pricing Model (CAPM). CAPM is a keystone of what is known as modern portfolio theory, the originator of which is Harry Markowitz who was awarded a Nobel Memorial Prize in Economic Sciences in 1990 for having developed the theory of portfolio choice.

In both formulations, price plays a central role as it guides the decisions of both 
households and investors. Along with the decisions of households and firms, determination of an equilibrium price is of paramount importance. The price variable is so important that microeconomics courses can carry and have carried the name “price theory.”

Other course details:
  • This is an introductory course that does not require any prerequisite.
  • This course can be taken on a standalone basis.
  • This course is chapter 1 in the book titled "Liquidity, Markets and Trading in Action, An Interdisciplinary Perspective"
  • It provides 3 PDUs (Strategic & Business Management skill) towards your PMP professional development education
Course Features
Credits:
3 PDU
Skill Section:
Strategic & Business Management
Access:
Lifetime
Test Questions:
15