QAA FINANCE SUBJECT BENCHMARKING GROUP
Draft Subject Benchmarking Statement April 2006
1 DEFINING PRINCIPLES
1.1 This statement is intended to cover programmes of study in finance in UK institutions
of higher education leading to the award of an honours degree. The study of finance
as the major component of an undergraduate degree involves the consideration of both
conceptual and applied aspects of the subject. The term 'conceptual' is intended to
explicitly include theoretical considerations. The term „applied‟ is intended to include
both the application and use of empirical methods, and relating theory to practice.
1.2 Degree programmes in the area typically have titles of the form „Finance‟ or
„Financial Management‟. Most degree programmes which contain a substantial
finance content will also include elements of accounting and economics.
1.3 Some programmes with titles other than those indicated can sensibly be evaluated
relative to this statement. It is the responsibility of an individual degree-granting
institution to relate any pathway within a degree programme to an appropriate
1.4 Finance can be studied as part of a joint programme with related or unrelated
disciplines (for example, finance and a modern language, finance and accounting,
finance and economics, finance and law, finance and mathematics). In such cases this
benchmarking statement should be applied in conjunction with others relating to the
joint programme. In the case of combined programmes the scope, depth and balance
of concepts and application, in terms of subject coverage, should not result in a
neglect of either the conceptual or the applied aspects of the subject.
1.5 Students taking a degree in finance do so for a variety of reasons. For example, many
may be using the degree as an introduction to the worlds of business and finance.
Others might be studying finance as a purely intellectual pursuit for its own sake.
Given the variety of reasons for which students take finance degrees, it is to be
expected that such degree schemes will have a range of aims. However, all degree
programmes in the subject must fit the benchmarking statement.
2 NATURE AND EXTENT OF SUBJECT
2.1 Finance is an activity concerned with the workings of capital markets and the
interaction between such markets and economic units such as households, firms,
financial institutions, government and overseas enterprises.
2.2 Finance as a degree subject requires students to study the design and operation of
financial systems, structures and instruments and, in particular, to understand the
pricing of financial assets, the measurement and management of risk, and the
possibilities for value maximising behaviour by the firm and household. Such study
can be pursued from a variety of perspectives, including, but not restricted to, the behavioural, the ethical, the economic, the sustainable, and the
statistical/mathematical. Although often studied in conjunction with accounting an in-depth knowledge of accounting is not required. However, basic knowledge of accounting practices and the principles of taxation, and their effect on the firm is required.
UBJECT-SPECIFIC KNOWLEDGE AND SKILLS 3 S
3.1 Paragraph 3.2 specifies subject-specific knowledge and skills that are outcomes of successful completion of a finance honours degree. Associated with each item is a set of examples, given in parentheses. The examples are given to help illustrate the outcomes of a finance degree, not to act as a set of prescriptions. It is not expected that degree programmes should include all the examples and most degree programmes will include additional learning outcomes.
3.2 On completion of a degree covered by this statement, a student should normally have the following subject-specific knowledge and skills.
(i) An appreciation of the nature of the contexts in which finance can be seen as operating including knowledge of the institutional framework necessary for understanding the role, operation and function of markets and financial institutions.
(e.g. the economic, legal, regulatory, and tax environment, both national and international; the firm; the capital markets; the public sector);
(ii) A knowledge of the major theoretical tools and theories of finance, and their relevance and application to theoretical and practical problems. (e.g. concept of arbitrage and examples of its use; financial mathematics and capital budgeting criteria; informational efficiency; optimal risk sharing; portfolio theory; asset pricing models and the valuation of securities; cost of capital; derivative pricing; risk management; information asymmetry; principal agency relationships; signalling; Fisher separation and capital budgeting criteria; behavioural finance; term structure and the movement of interest rates; determination of exchange rates; financial intermediation);
(iii) An ability to interpret financial data including that arising in the context of the firm or household from accounting statements, and data generated in financial markets. The interpretation may involve analysis using statistical and financial functions and procedures such as are routinely available in spreadsheets (eg Excel) and statistical packages. It may assume the skills necessary to manipulate financial data and carry out statistical and econometric tests (e.g. estimation and interpretation of asset pricing models; financial modelling and projections; event studies and residuals analysis; elements of time series analysis such as serial correlation mean reversion, and stochastic volatility);
(iv) An understanding of the relationship between financial theory and empirical testing, and application of this knowledge to the appraisal of the empirical evidence in at least one major theoretical area. The appraisal should involve some recognition of the limitation and evolution of empirical tests and theory. (e.g. the efficient markets hypothesis; anomalies; pricing of derivatives and other securities; bond portfolio management; exchange rates; raising capital and capital structure);
(v) An understanding of the financing arrangements and governance structures of
business entities, and an appreciation of how theory and evidence can be combined to
assess the effectiveness and efficiency of such arrangements. (e.g. decisions as to
sources of finance and financial structure; the pricing of corporate securities; the
market for corporate control; corporate governance structures and mechanisms;
financial planning; international dimensions of finance);
(vi) An understanding of the factors influencing the investment behaviour and
opportunities of private individuals (bonds, equities, and derivatives; risk aversion;
risk/return trade-offs; portfolio management and performance measurement; pensions
and long term savings; the tax treatment of savings and investments; international
diversification; FOREX risk; objectives of and constraints on institutional investors
(vii) An understanding of financial service activity in the economy and an appreciation of
how finance theory and evidence can be be employed to interpret these services. For
example information asymmetry, adverse selection, moral hazard could be employed
to analyse the fundamental nature of services such as insurance, pensions, bank
lending, and consumer credit and also explore fundmental problems arising in such
financial service provision. EMH could be used to explore evidence for fund manager
performance and the effectiveness of equity and bond saving services.
(viii) An ability to understand financial statements, and a basic appreciation of the
limitations of financial reporting practices and procedures: (e.g.; financial statement
analysis; the relation between cash flow accounting and accrual accounting;
discretionary accounting practices; nature of accounting measures of financial
4 COGNITIVE ABILITIES AND NON-SUBJECT SPECIFIC SKILLS
4.1 On completion of a degree covered by this statement, a student should have the
following abilities and skills:
(i) a capacity for the critical evaluation of arguments and evidence;
(ii) an ability to analyse and draw reasoned conclusions concerning structured and, to a
more limited extent, unstructured problems from a given set of data and from data
which must be acquired by the student;
(iii) ability to locate, extract and analyse data from multiple sources, including the
acknowledgement and referencing of sources;
(iv) numeracy skills, including the ability to manipulate financial and other numerical data
and to appreciate statistical concepts at an appropriate level;
(v) skills in the use of communication and information technology in acquiring, analysing
and communicating information (these skills include the use of spreadsheets, word
processing software, standard statistical packages; electronic financial databases; the
web and e-mail);
(vi) communication skills including the ability to present quantitative and qualitative
information together with analysis, argument and commentary in a form appropriate
to different intended audiences;
(vii) capacities for independent and self-managed learning;
(viii) normally, experience of working in groups, and other inter-personal skills, and in
presenting the results of their work orally as well as in written form;
EACHING, LEARNING AND ASSESSMENT 5 T
5.1 It is the responsibility of each institution offering a degree programme in finance to
select a set of teaching, learning and assessment activities that is appropriate for
meeting the aims and desired outcomes of the programme. Whatever set of activities
is determined, an institution should be able to demonstrate (for all pathways through
the degree programme leading to the award of a degree in finance) how these
activities enable students to achieve the subject-specific knowledge and skills set out
in Section 3 and the cognitive abilities and non-subject specific skills set out in
5.2 No one set of teaching and learning activities is uniquely suitable to the study of
finance independent of the context of the degree programme. The design of such
activities will take into account:
(i) the nature of the study of finance and the need to achieve an appropriate balance
between the conceptual (including theoretical) and applied aspects of the subject:
(ii) the extent to which the degree programme reflects current research and academic
(iii) the nature of the student population addressed by a particular institution (for example,
predominantly full-time or sandwich students; mainly part-time currently in
employment; level of relevant experience);
(iv) the mode of delivery (for example, full-time; part-time; sandwich; modular; distance
5.3 Assessment activities can have both formative and summative aspects. Therefore,
teaching and learning activities and assessment activities cannot always be rigidly
5.4 No single form of assessment activity is uniquely appropriate for evaluating student
achievement on degree programmes in finance. There should be a suitable balance
and mix of assessment activities to allow and require students to demonstrate not only
their understanding of the conceptual and applied aspects of finance but also the
cognitive abilities and non-subject-specific skills they have developed as a
consequence of their studies. Also consideration needs to be given to the balance
between formal assessment activities and other forms of non-assessed experiences
that together contribute to the development of the finance graduate.
5.5 The balance and mix of assessment activities should take into account the reliability of
the chosen activities in providing indicators of individual performance in terms of the
outcomes indicated in Section 3 and 4 above.
ERFORMANCE STANDARDS 6 P
6.1 Here are presented guides as to minimum standards of achievement that warrant the
award of an honours degree – the threshold level of achievement to be matched or
exceeded by all successful graduates. We also identify ways in which “typical”
students can distinguish themselves from “threshold” students.
6.2 Evidence of achievement with respect to many of the learning outcomes of a finance
degree programme is likely to spread across several units, courses or modules making
up the programme. At present, the award and classification of degrees at any
institution will depend on that institution‟s rules and procedures. These rules and
procedures are usually based on an individual student‟s profile of achievement across
the units, courses or modules taken as part of the degree programme. The rules and
procedures often incorporate provisions for condoning or compensating failures on
specific units, courses or modules. They also have the effect of trading off
achievement levels for particular learning outcomes against relative lack of
achievement in respect of other learning outcomes.
6.3 It is not the purpose of this statement to specify rules and procedures for classifying
finance degrees. However, if the achievement of specific learning outcomes is not
shown directly by passing individual units, courses or modules, institutions will need
to demonstrate how evidence is gathered, across the whole range of assessment
activities, to support degree awards. Students should be able to demonstrate ability in
relation to most of the learning outcomes and they should have exposure to all others.
6.4 In describing attainment the following dimensions are identified:
(i) Basic knowledge and understanding – basic knowledge and understanding is
characterised by knowledge of a topic in outline, together with an understanding
which demonstrates some limited ability to make comparisons and critical evaluations.
Graduates with thorough knowledge and understanding can be expected to explain
what they have learnt and to display critical evaluation of the knowledge.
(ii) Cognitive abilities and skills – basic levels of attainment are characterised by minimal
proficiency in the ability or skill. Graduates with a threshold level of attainment can
be expected to perform well in simple or straightforward situations. Graduates with
high levels of cognitive abilities and skills can also perform well in complex
(iii) Situations – are described as “ simple” if there are few items of data and the relationships among them are restricted to principal factors under consideration in a particular topic. Straightforward situations are slightly more complex than simple situations and contain routine elaborations of simple situations. By way of contrast, complex situations are characterised by many items of data, multiple relationships, extraneous data and, frequently, a mix of qualitative and quantitative criteria to be applied.
6.5 Given the above, threshold graduates:
(i) will demonstrate a basic appreciation of the nature of the context and
institutional framework in which finance operates;
(ii) will demonstrate a basic knowledge of the main theories used in finance and a
basic ability to apply them in simple structured situations from given data
generated for the purpose;
(iii) will reveal a basic ability to interpret straightforward financial data and carry
out simple statistical and financial analysis;
(iv) be able to relate empirical evidence to finance theory in at least one of the
main areas of finance with a basic understanding of the significance and
limitations of such evidence;
(v) will demonstrate a basic understanding of the financial needs of business
entities, a basic appreciation of how theory and evidence may be used to guide
practice, and a basic understanding of the workings of capital markets, the
relationship between risk and return, and the nature and use of financial
(vi) will demonstrate a basic understanding of the principles of personal
(vii) will demonstrate a basic ability to use and interpret the information in
(viii) will demonstrate possession of the required cognitive abilities and non-subject
specific skills to a basic level of attainment.
(ix) Will demonstrate a basic understanding of the economic environment in which
6.6 The identification of threshold standards above is intended to represent the minimum standards of achievement consistent with the award of an honours degree in finance by an institution of higher education within the UK. This does not, however, preclude an institution of higher education within the UK from setting higher standards for the award of an honours degree in finance within the dimensions of performance identified in 6.5. Nor does it preclude such an institution from requiring additional
dimensions of performance, relative to those identified in 6.5. above, for the award of
an honours degree in finance.
6.7 Typical graduates can distinguish themselves from threshold graduates by displaying
a more thorough knowledge and understanding and enhanced technical abilities. They
can also demonstrate an enhanced capacity to develop and apply critical, analytical
and problem solving abilities and skills. However, typical graduates are not expected
to distinguish themselves from threshold graduates on all the dimensions of the
performance identified in 6.5 above.