Financial Markets (2011)

About the Course

An overview of the ideas, methods, and institutions that permit human society to manage risks and foster enterprise. Description of practices today and analysis of prospects for the future. Introduction to risk management and behavioral finance principles to understand the functioning of securities, insurance, and banking industries.

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Course Structure

This Yale College course, taught on campus twice per week for 75 minutes, was recorded for Open Yale Courses in Spring 2011.

Course Materials

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About Professor Robert J. Shiller

Robert J. Shiller is Arthur M. Okun Professor of Economics at Yale University and a Fellow at the International Center for Finance at the Yale School of Management. Specializing in behavioral finance and real estate, Professor Shiller has published in Journal of Financial Economics, American Economic Review, Journal of Finance, Wall Street Journal, and Financial Times. His books include Market Volatility, Macro Markets (for which he won TIAA-CREF's Paul A. Samuelson Award), Irrational Exuberance, The New Financial Order: Risk in the Twenty-First Century, and Finance and the Good Society.

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Syllabus

Professor

Robert J. Shiller, Arthur M. Okun Professor of Economics

Description

An overview of the ideas, methods, and institutions that permit human society to manage risks and foster enterprise. Description of practices today and analysis of prospects for the future. Introduction to risk management and behavioral finance principles to understand the functioning of securities, insurance, and banking industries.

Texts

Main texts

Fabozzi, Frank J., Franco Modigliani, Frank J. Jones, and Michael G. Ferri. Foundations of Financial Markets and Institutions, 4th ed. Prentice Hall, 2010.

Shiller, Robert J. Finance and the Good Society. Princeton University Press, 2012.

Course Packet

Brandeis, Louis D. Other People's Money and How the Bankers Use It. Augustus M. Kelley Publishers, Reprints of Economic Classics, 1971.

Brealey, Richard. Stuart C. Myers, and Franklin Allen. Principles of Corporate Finance, 8th edition. McGraw-Hill/Irwin, 2005.

Bagehot, Walter. Lombard Street: A Description of the Money Market. Scribner, Armstrong & Co, 1873. (freely available as a Google eBook)

Carnegie, Andrew. The Gospel of Wealth and Other Timely Essays. The Century Company, 1901. (freely available as a Google eBook)

Commodity Futures Trading Commission and Securities Exchange Commission. Findings Regarding the Market Events of May 6, 2010. Report to the Joint Advisory Committee on Emerging Regulatory Issues, Washington DC: U.S. Commodity Futures Trading Commission, September 30, 2010

Conant, Charles A. Wall Street and the Country: A Study of Recent Financial Tendencies. G.P. Putnam’s Sons, 1904. (freely available as a Google eBook)

Douglas, William O. Democracy and Finance. Yale University Press, 1940.

Ellis, Charles. The Partnership: The Making of Goldman Sachs. Penguin, 2008.

Fraser, Steve. Wall Street: America’s Dream Palace. Yale University Press, 2009.

Gorton, Gary. “Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007.” Federal Reserve Bank of Atlanta Financial Markets Conference, 2009.

Hawtrey, R. G. The Art of Central Banking. Longmans, Green and Co., 1932.

Johnson, Simon, Rafael La Porta, Florencio Lopez-di-Silanos, and Andrei Shleifer. "Tunneling." American Economic Review, 2000, 90(2).

Lehrer, Jonah. “The Truth Wears Off: Is there Something Wrong with the Scientific Method?” The New Yorker, December 13, 2010.

O'Barr, William M. and John M. Conley. Fortune & Folly: The Wealth & Power of Institutional Investing. Business-One Irwin, 1992.

Seligman, Edwin R. A. The Income Tax: A Study of the History, Theory, and Practice of Income Taxation at Home and Abroad. 2nd edition, MacMillan, 1914. (freely available as a Google eBook)

Shiller, Robert J. Irrational Exuberance, 2nd edition. Doubleday, 2006.

Shiller, Robert J. The New Financial Order: Risk in the 21st Century. Princeton University Press, 2003.

Siegel, Jeremy J. Stocks for the Long Run: the definitive guide to financial market returns and long-term investment strategies, 4th edition. McGraw-Hill, 2008.

Sullivan, Teresa, Elizabeth Warren and Jay Lawrence Westbrook. The Fragile Middle Class: Americans in Debt. Yale University Press, 2000.

Sumner, William Graham. What the Social Classes Owe Each Other. Harper Brothers, 1883. (freely available as a Google eBook)

Swensen, David. Pioneering Portfolio Management. Free Press, 2000.

Thaler, Richard H. and Cass R. Sunstein. Nudge: Improving Decisions about Health, Wealth and Happiness. Yale University Press, 2008.

“The Gospel of Wealth” (Review) San Francisco Chronicle, February 9, 1890.

Unger, Peter. Living High and Letting Die: Our Illusion of Innocence. Oxford University Press, 1996.

Working, Holbrook, "Futures Trading and Hedging," American Economic Review, June 1953.

World Economic Forum. Partnering to Strengthen Public Governance. Geneva, 2008.

Requirements

Some facility with elementary algebra and calculus required. Course exams consist of roughly 50% math and theory problems and 50% facts and general understanding questions about financial markets.

Grading

Midterm exam 1: 20%
Midterm exam 2: 30%
Problem sets: 10%
Final exam: 40%

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Course Books and Other Related Titles

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