MSc Banking and Finance

Reading List 2016-17

Core Texts

Please note a further detailed reading list will be provided by the module leader at the start of
each module.

Semester 1

1) 7SSMM700 – Quantitative Methods for Finance

 Brooks, C. (2014). Introductory Econometrics for Finance, third edition.

Cambridge University Press, Cambridge.
 Woodridge, J (2014) Introductory Econometrics: A Modern Approach, fourth edition.
Cengage Learning.
 Greene, William H. (2012, 7th ed.) Econometric Analysis. Prentice Hall.

2) 7SSMM701 – Investments

 Brealey R. and S. Meyers (2014), Principles of Corporate Finance, Last Edition, McGraw
Hill.
 Bodie Z., Kane A. and A. J. Marcus (2015), Investments, Last Edition, McGraw Hill. CFA
Institute (2014), Standards or Practice Handbook, Eleventh Edition,
 CFA Institute. Copeland T.E. and J.F. Weston (2000), Financial Theory and Corporate
Policy, Addison-Wesley.
 DeFusco, R., McLeavey, D., Pinto, J., Runkle, D., Anson, M. (2016),
Quantitative Investment Analysis, Third Edition, Wiley

3) 7SSMM702 – Commercial and Investment Banking

 Casu, B., Girardone, C., Molyneux, P., (2015). Introduction to Banking, second edition.
Pearson Higher Education.
 Heffernan, S., (2005). Modern Banking. John Wiley and Sons.
 Hull, J., (2015). Risk Management and Financial Institutions, fourth edition. John Wiley
and Sons.

4) 7SSMM703 – Financial Statements

 Principles of Managerial Finance, by Lawrence J. Gitman, Pearson International Edition,

Brief Fifth Edition, 2009, ISBN: 0321566556
 Understanding Financial Statements, by Lyn M. Fraser and Aileen Ormiston, Pearson
International Edition, Ninth Edition, 2010, ISBN: 0138153272
Semester 2

1) 7SSMM704 Financial Derivatives

 Boyle, P & McDougall, J. (2015). Trading and Pricing Financial Derivatives: A Guide to
Futures, Options, and Swaps. CreateSpace, Charleston USA.
 Hull, J. (2014). Options, Futures, and Other Derivatives (9th Edition). Prentice Hall, USA.

2) 7SSMM705 Asset Pricing

 Hull, J. (2011), “Options, futures and other derivatives”, 8th edition, Pearson Education.
 Bodie Z., A. Kane and A.J. Marcus (2011), Investments and Portfolio Management, 9th
edition, McGraw‐Hill Irwin.
 Ang, A. (2014), Asset Management: A Systematic Approach to Factor Investing, Oxford
University Press.
 Mikosch, Thomas (1998), Elementary Stochastic Calculus with Finance in View, World
Scientific.

3) 7SSMM706 Empirical Finance

 Cuthbertson and Nitzsche (2004) Quantitative Financial Economics, Wiley.

 Lo and MacKinlay (1999) A Non-Random Walk Down Wall Street, Princeton.
 Campbell, Lo and MacKinlay (1997) The Econometrics of Financial Markets, Princeton.
 LSTA, Taylor and Sansone (2007) Loan Syndications and Trading, Wiley.
 Deacon (2005) Global Securitisation and CDOs, Wiley

4) 7SSMM707 Risk Management

 Casu, B., Girardone, C., Molyneux, P., (2015). Introduction to Banking, second edition.
Pearson Higher Education.
 Danielsson, J., (2013). Global Financial Systems. Stability and Risk, first edition. Pearson
Higher Education.
 Hull, J., (2015). Risk Management and Financial Institutions, fourth edition. John Wiley
and Sons.
 Mishkin, F., Eakins, S., (2015). Financial Markets and Institutions, eighth edition. Pearson
Higher Education.

5) 7SSMM708 Financial Econometrics

 John Y Campbell, Andrew W Lo and A Craig MacKinlay, The Econometrics of Financial

Markets. Princeton University Press.
 6) 7SSMM709 Corporate Finance

 Damodaran, A. (2014). Applied Corporate Finance, fourth edition. Wiley.

 Brealey, R., & Meyers, S. (2011). Fundamentals of Corporate Finance, seventh edition.
McGraw Hill/Irwin Series in Finance, Insurance and Real Estate.

7) 7SSMM711 Banking Regulation

 C. Goodhart et al., Financial Regulation: Why, How and Where Now? (Routledge, 1998).
 Rosa M Lastra (ed), Cross-Border Bank Insolvency (Oxford: OUP, 2011).
 Rosa M Lastra, International Financial and Monetary Law (2nd ed., Oxford: OUP, 2015).
 Mario Giovanoli and Diego Devos (eds), International Monetary and Financial Law:
The Global Crisis (Oxford: OUP, 2010).
 S. Valdez and P. Molyneux, An Introduction to Global Financial Markets (Macmillan,
2010).
 R. Cranston, Principles of Banking Law (OUP 2002).
 H. Scott and A. Gelpern, International Finance: Transactions, Policy and Regulation
(Foundation Press 2011).
 C. Goodhart, The Regulatory Response to the Financial Crisis (Edward Elgar
Publishing Ltd, 2010).
 T. F. Huertas, Crisis: Cause, Containment and Cure (Palgrave Macmillan, 2011).

8) 7SSMM712 Topics in Applied Finance

To be confirmed

9) 7SSMM610 - Behavioural Finance

 Forbes, W., Behavioural Finance, John Wiley and Sons, West Sussex, UK, 2009.
 Thaler, R.H., Advances in Behavioural Finance, Russell Sage Foundation, NY, 1993.

10) 7SSMM715 Research Project

 Baum, F. An Introduction to Modern Econometrics Using Stata, 2006, Stata Press.

 Vogelvang, B. Econometrics: Theory & Applications with Eviews, 2004, Prentice Hall

Useful articles topic by topic for Research Project (Provisional)

Monetary Policy and Stock Market

 Allen, F., Gale, D., 2001. Bubbles and crises. Economic Journal, 110, 236-55.
 Bean, C.R., 2005. Asset prices, financial instability and monetary policy. American Economic
Review 94, 14-18.
 Bernanke, B. S., 2000. Monetary policy and asset price volatility. NBER Working Paper Series
7559.
 Bernanke, B.S., Gertler, M., 1999. Monetary policy and asset market volatility. Federal Reserve
Bank of St. Kansas City Economic Review 84, 17-52.
 Bernanke, B. S., Gertler, M., 2001. Should Central Banks Respond to Movements in Asset
Prices? American Economic Review 91, 253-257.
 Bernanke, B.S., Mihov, I., 1998. Measuring monetary policy. Quarterly Journal of Economics
113, 869-902.
 Bordo, M.D., Jeanne, O., 2002. Boom-busts in asset pricesm economic instability and monetary
policy. NBER Working Paper Series 8966.
 Cecchetti, S.G., Genberg, H., Wadwhani, S., 2002. Asset prices in flexible inflation targeting
framework. NBER Working Paper Series 8970.
 Cecchetti, S.G., Genberg, H., Lipsky, J., Wadwhani, S., 2000. Asset Prices and Central Bank
Policy. The Geneva Report on the World Economy.
 Fuhrer, J., Tootell, G., 2008. Eyes on the prize: How did the fed respond to the stock market?
Journal of Monetary Economics 55, 796-805.
 Filardo, A., 2000. Monetary policy and assert prices. Federal Reserve Bank of Kansas City
Economic Review 85, 11-37.
 Frait, J., Komarek, L., 2006. Monetary Policy and Asset Prices: What Role for Central Banks in
New EU Member States? Department of Economics, University of Warwick, Working paper
series 738.
 Gilchrist, S., Leahy, J.V., 2002. Monetary policy and asset price. Journal of Monetary
Economics 49, 75-97.
 Godhart, C., Hofmann, B., 2002. Do asset prices help to predict consumer price index? The
Manchester School 68, 122-40.
 Goodfriend M., 2005. Interest rate policy should not react directly to asset prices, in Hunter,
W.C., Kaufman, G.G., Pomerlano, M. (eds), Asset price bubbles: the implication for monetary,
regulatory and international policies, MIT press.
 Mishkin, F.S., 2001. The transmission mechanism and the role of asset prices in monetary
policy. NBER Working Paper Series 8617.

Pairs trading: can the market be systematically beaten?

 Baronyan S., Boduroglu, I., Sener, E., 2010. Investigation of stochastic pairs trading strategies
under different volatility regimes. The Manchester School 78, 114-143.
 Chng, M., 2009. There is something about pairs trading. Corporate Finance Review 13, 27-35.
 Eliott, R. J., Van Der Hoek, J., 2005. Pairs trading. Quantitative Finance 3, 271-276
 Gatev, E., Goetzman, W. N., Rouwenhorst, K. G., 2006. Pairs trading: performance of a
Relative-Value Arbitrage Rule. Review of Financial Studies 19, 797-827.
 Lin Y.X., McCrae, M., Gulati, C., 2006. Loss protection in pairs trading through minimum
profit bounds: a cointegration approach. Journal of Applied Mathematics and Decision Science,
1-14.
 Perlin, M. S., 2009. Evaluation of pairs-trading strategy at the Brazilian financial market.
Journal of Derivatives and Hedge Funds 15, 122-136.
 Schmidt, A. D., 2008. Pairs trading: A cointegration approach. University of Sidney.
 Vidyamurthy, G., 2004. Pairs trading: Quantitative methods and analysis. Wiley.

Equilibrium and competition in the banking sector

 Allen F., H.Gersbach, J.P. Kranhlen, A.M. Santomero, 2001. Competition among banks:
introduction and conference overview. European Finance Review 5, 1-11.
 Bikker, J.A. and Haaf, K, 2002. Competition, concentration and their relationship: an empirical
analysis of the banking industry. Journal of Banking and Finance 26, 2191-2214.
 Bikker J.A., L.Spierdijk, Finnie P, 2007. Missespecification in the Panzar - Rosse model:
assessing competition in the banking industry, Working Paper, De Nederlandsche Bank.
 Goddard, J., Wilson, J., 2009. Competition in banking: A disequilibrium approach, Journal of
Banking and Finance 33, 2282-2292.
 Leonida L., Silipo D., 2011. Competition and the Adjustment Processes, Mimeo.
 Hempell H.S., 2002. Testing for competition among German banks, Economic Research
Centre, Deutsche Bundesbank.
 Kiviet J.F., 1995. On bias, inconsistency, and efficiency of various estimator in dynamic panel
data models. Journal of Econometrics 68, 53-78.
 Molyneux P., D.M. Lloyd, Thornton W.J., 1994. Competitive conditions in European banking.
Journal of Banking and Finance 18, 445-459.
 Panzar, J.C., Rosse, J.N., 1987. Testing for monopoly equilibrium, Journal of Industrial
Economics 35, 443-456.
 Shaffer S., 1989. Competition in the US banking industry Economics Letters 29, 321–323.
 Shaffer S, 2004. Patterns of competition in banking. Journal of Economics and Business 54, 287-
313.
 Trivieri F., 2007. Does cross-ownership affect competition? Evidence from the Italian banking
industry. Journal of International Financial Markets, Institutions and Money 17, 79-101.
 Vesala J., 1995. Testing for competition in banking: behavioural evidence from Finland. Bank of
Finland studies.

Investment models and imperfections in capital markets

 Allayannis, G., Mozumdar, A., 2004. The impact of negative cash flow and influential
observations on investment cash flow sensitivity estimates. Journal of Banking and Finance 28,
901-930.
 Almeida, H., Campello, M., 2001. Financial constraints and investment-cash flow sensitivities:
new research directions. Mimeo, New York University.
 Almeida, H., Campello, M., Weisbach, M., 2004. The cash flow sensitivity of cash. Journal of
Finance 59, 177-1804
 Bond, S., Meghir, C., 1994. Dynamic investment models and the firm's financial policy. Review
of Economic Studies 61, 197-222.
 Cleary, S., 1999. The relationship between firm investment and financial status. The Journal of
Finance 54, 673-692.
 Cleary, S., Povel, P., Raith M., 2007. The U-Shaped Investment Curve: Theory and Evidence.
Journal of Financial and Quantitative Analysis 42, 1-39.
 Fazzari, S.M., Hubbard, R.G., Petersen, B.C., 1988. Financing constraints and corporate
investment. Brookings Papers on Economic Activity 1, 141-195.
 Fazzari, S.M., Hubbard, R.G., Petersen, B.C., 2000. Investment-cash flow sensitivities are
useful: A comment on Kaplan and Zingales. Quarterly Journal of Economics 115, 695-705.
 Hubbard, G., 1998. Capital market imperfections and investment. The Journal of Economic
Literature 36, 193-225.
 Kaplan, S.N., Zingales, L., 1997. Do investment-cash flow sensitivities provide useful measures
of financing constraints. Quarterly Journal of Economics 112, 169-215.
 Kaplan, S.N., Zingales, L., 2000. The investment-cash flow sensitivities are not valid masures of
financing constraints. Quarterly Journal of Economics 112, 705-710.
 Iona, A., Leonida, L., Ozkan, A., 2006. On the relationship between the cash flow sensitivity
and the degree of financing constraints. Evidence from the UK firms, Discussion Papers, SOBE,
University of Exeter.
 Povel, P., Raith, M., 2002. Optimal investment under financial constraints: the roles of internal
funds and asymmetric information. Working Paper, University of Rochester and CEPR.

Financial policies and the value of the firm

 Altman, E.I., 1968. Financial Ratios, discriminant analysis and the prediction of corporate
bankruptcy. The Journal of Finance 23, 589-609.
 Altman, E.I., Haldeman, R.G., Narayanan, P., 1977. Zeta analysis: a new model to identify
bankruptcy risk of corporations. Journal of Banking and Finance 1, 29-54.
 Bhagat, S., Moyen, N., Suh, I., 2005. Investment and internal funds of distressed firms. Journal
of Corporate Finance 11, 449-472.
 Iona, A., Leonida, L., Ozkan, A., 2004. Determinants of financial conservatism: Evidence from
low-leverage and cash-rich UK firms, Discussion Papers 04/01, University of York.
 Iona, A., Leonida, L., 2012. Policy of cash in excess and ownership structure, Mimeo.
 Hubbard, G., Kashiap, A.K., Whited, T., 1995. Internal finance and firm investment. Journal of
Money, Credit and Banking 27, 683-701.
 Modigliani, F., Miller, M.H., 1958. The cost of capital, corporation finance, and the theory of
investment. American Economic Review 48, 261-297.
 Myers, S.C., 1977. Determinants of corporate borrowing. Journal of Financial Economics 5,
147-175.
 Myers, S.C., 1984. The capital structure puzzle. Journal of Finance 39, 575-592.
 Whited, T.M., 1992. Debt, liquidity constraints and corporate investment: evidence from panel
data. The Journal of Finance 47, 1425-1460.
 Whited, T.M., Wu, G., 2006. Financial constraints risk. Review of Financial Studies 19, 531-
559.

The efficient capital market hypothesis and behavioural finance

 Baillie, R.T., Bollerslev T., 2000. The Forward Premium Anomaly Is Not As Bad As You
Think. Journal of International Money and Finance 19, 471-488.
 Baldwin, R., 1990. Re-interpreting the failure of foreign exchange market efficiency test: small
transaction costs, big hysteresis bands. NBER Working Paper Series 3319.
 Ball, R., 2009. The global financial crisis and the efficient market hypothesis: what have we
learned? Journal of Applied Corporate Finance 21, 8-16.
 Beechey, M., Gruen, D., Vickery, J., 2000. The efficient market hypothesis: a survey. Reserve
Bank of Australia Research Discussion Paper 1.
 Chen, S.H., Yeh, C.H., 2002. On the emergence of properties of artificial stock markets: the
efficient market hypothesis and the rational expectations hypothesis. Journal of Economic
Behavior and Organization 49, 217-239.
 Chinn, M.D. Frankel, J.A., 1994. Patterns in Exchange Rate Forecasts for 25 Currencies.
Journal of Money, Credit and Banking 26, 759-770.
 Clarida R.H., Taylor, M.P., 1997. The term structure of forward exchange premiums and the
forecastability of spot exchange rates: correcting the errors. Review of Economics and Statistics
79, 353-361.
 Engel C., 1996. The forward discount anomaly and the risk premium: A survey of recent
evidence, Journal of Empirical Finance 3, 123-192.
 Frankel, J.A., Engel, C.M., 1984. Do Asset Demands Optimize over the Mean and Variance of
Returns? A Six Currency Test. Journal of International Economics 17, 309-323.
 Frankel, J.A., Froot, K.A., 1987. Using Survey Data to Test Standard Propositions Regarding
Exchange Rate Expectations. American Economic Review 77, 133-153.
 Moore, M.J., 1994. Testing for Unbiasedness in Forward Markets. The Manchester School 62,
67-78.
 Jagric, T., Podobnik, B., Kolanovic, M., 2005. Does the efficient market hypothesis hold?
Evidence from six transition countries. Eastern European Economics 43, 79-103.
 Lewis, K.K., 1995. Puzzles in International Financial Markets, in Grossman, G. M. and Rogoff,
K. (eds), The Handbook of International Economics, vol. 3.
 Malkiel, B.G., 2003. The efficient market hypothesis and its critics. Journal of Economic
Perspective 17, 59-82.
 Sarno, L., Thorthon, D.L., 2004. The efficient market hypothesis and identification in structural
VARs. Federal Reserve Bank of St. Louis Review 86, 49-60.
 Timmermann, A., Granger, C., 2003. Efficient market hyphothesis and forecasting.
International Journal of Forecasting 20, 15-27.
 Verdelhan, A., 2006. A Habit-Based Explanation of the Exchange Rate Risk Premium. Mimeo
Boston University.
 Villanueva, O.M., 2005. FX Dynamics, Limited Participation, and the Forward Bias Anomaly.
The Financial Review 40, 67-93.

Does the Purchase power parity holds?

 Abuaf, N., Jorion, P., 1990. Purchasing power parity in the long run. Journal of Finance 45,
157-74
 Engel, C., 1996, Long run PPP may not hold after all. NBER Working Paper Series 5646.
 Frankel, J.A., Rose, A.K., 1996. A panel project on purchasing power parity: mean revision
within and between countries. Journal of International Economics 40, 209-24.
 Froot, K.A., Rogoff, K., 1994. Perspectives on PPP and long run real exchange rates. NBER
Working Paper Series 4952.
 Imbs, J.,Mumtaz, H., Ravn, M.O., Rey, K., 2005. PPP strikes back: Aggregation and the real
exchange rate. Quarterly Journal of Economics 120, 1-43.
 Koedijk, K.G., Tims, B., van Dijk, M.A., 2004. Purchasing power parity and the Euro area.
Journal of International Money and Finance 23, 1081-107.
 O’Connell, P.G.J., 1998. The overevaluation of purchasing power parity. Journal of
International Economics 44, 1-19.
 Pappell, D.H., 1998. Searching for stationarity: Purchasing power parity under the current float.
Journal of International Economics 43, 313-32.
 Rogoff, K., 1996. The purchasing power parity puzzle. Journal of Economic Literature 34, 647-
668.
 Sarno, L., 2005. Towards a solution to the puzzles in exchange rate economics: Where do we
stand?. Warwick Business School Working Paper Series 05-11
 Sarno, L., Taylor, M.P., 2002. Purchasing power parity and the real exchange rate.
International Monetary Fund Staff Papers, 49.
 Sarno, L., Valente, G., 2004. Deviations from purchasing power parity under different exchange
regimes: Do they revert and, if so, how. University of Warwick mimeo.
 Taylor, A.M., 2002. A century of purchasing power parity. Review of Economics and Statistics
84, 139-50.
Predicting volatility in financial markets

 Bauwens, L., Laurent, S., Rombouts, J.V.K., 2006. Multivariate GARCH models: a survey.
Journal of Applied Econometrics 21, 79-109.
 Bera, A.K., Higgins, M.L., 2006. ARCH models: properties, estimation and testing. Journal of
Economic Surveys 7, 305-366.
 Bollerslev, T., 1986. Generalized autoregressive conditional heteroskedasticity. Journal of
Econometrics 31, 307-327.
 Engle, R., 1982. Autoregressive conditional heteroskedasticity with estimates of the variance of
the UK inflation. Econometrica 50, p. 987-1008.
 Engle, R., Bollerslev, T., 1986. Modelling the persistence of conditional variances. Econometric
Review 5, 1-50.
 Engle, R., Mustafa, C., 1992. Implied ARCH models from options prices. Journal of
Econometrics 52, 289-311.
 Gourieroux, G., 1997. ARCH models and financial applications. Springer.
 Hamilton. J. D., 1994. Time series analysis. Cambridge Unviersity Press.
 Hidalgo, J., Zaffaroni, P., 2007. A goodness of fit test for ARCH models. Journal of
Econometrics 141, 835-875.
 Jeanthreau, T., 2002. A link between complete models with stochastic volatility and ARCH
models. Finance and Stochastics 8, 111-131.
 Lundbergh, T. T., 2002. Evaluating GARCH models. Journal of Econometrics 110, 417-435.
 Nelson, D.B., Conditional heteroskedasticity in asset returns: A new approach. Econometrica
59, 347-370.
 So, M.K.P., Phillip L.H.Y., 2006. Empirical analysis of GARCH models in values at risj
estimation. Journal of International Financial Markets, Institutions and Money 16, 180-197.

Presentation of data sources

 Thomson Reuters, 2008. Datastream global equity indices, User Guide 5.

 Standard and Poor’s, 2011. Compustat Xpressfeed - Understanding the data.