Basic Principles of Asset Pricing

2020/2021

Academic Year

ENG

Instruction in English

4

ECTS credits

Delivered at:

Department of Finance

Course type:

Elective course

When:

1 year, 3, 4 module

Course Syllabus

Abstract

This is an introductory course to the asset pricing. The course starts with the overview of asset pricing and progresses towards the more advanced topics on asset pricing. It also discusses empirical puzzles and recent theories that have been developed to try to solve them.

Learning Objectives

• To provide substantial knowledge about the asset pricing and its application in solving real life problems in finance.

Expected Learning Outcomes

• Students are able to critically analyze the given problem and to derive comprehensive solutions for the given problem.
• Students have knowledge of asset pricing models and its appropriate applications.
• Students are able to Identify problem and select appropriate model.
• Students are able to develop new model and apply it to solve the problems in finance.

Course Contents

• Overview of asset pricing
• Classic issues in finance
• Discount factor
• Mean-variance frontier & beta representations
• Trends of factor models used in asset pricing
• Generalized Method of Moments
• Fama-French and Performance Evaluation
• Econometrics of linear factor pricing models
• Macroeconomics and asset pricing
• Portfolio theory

Assessment Elements

• In-class participations/presentations/Assignments
• Midterm exam
• Final exam
  Here are the instructions for your upcoming End term exam on Basic Principles of Asset Pricing. Medium: Via LMS Type of Exam: Open Book Total Marks: 55 Number of Questions: 9 Allowed: Both online and offline resources…You may refer all available resources Not Allowed: Late Submission; Copy and Paste (Similarly above 15 %) Exam Execution Details: Step 1: Questions will be uploaded in the LMS at the end of the day June 10, 2020 around 23:59 PM Step 2: You will have full day to answer the questions on 11/06/2020 and … deadline for submission of the question answers will be by the end of the same day in PDF format via LMS : 11/06/2020; 23:59:59 Hours SPB Time.

Interim Assessment

• Interim assessment (4 module)
  0.55 * Final exam + 0.2 * In-class participations/presentations/Assignments + 0.25 * Midterm exam

Bibliography

Recommended Core Bibliography

• Cochrane, J. H. (2005). Asset Pricing (Vol. Rev. ed). Princeton, N.J.: Princeton University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=329716

Recommended Additional Bibliography

• Cochrane, J. H. (1991). Production-Based Asset Pricing and the Link Between Stock Returns and Economic Fluctuations. Journal of Finance (Wiley-Blackwell), 46(1), 209–237. https://doi.org/10.1111/j.1540-6261.1991.tb03750.x
• Eugene F. Fama, & Kenneth R. French. (2010). Luck versus Skill in the Cross-Section of Mutual Fund Returns. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.FE5C742C
• FAMA, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance (Wiley-Blackwell), 25(2), 383–417. https://doi.org/10.2307/2325486
• Fama, E. F. (1991). Efficient Capital Markets: II. Journal of Finance, (5), 1575. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.bla.jfinan.v46y1991i5p1575.617
• Fama, E. F., & French, K. R. (1996). Multifactor Explanations of Asset Pricing Anomalies. Journal of Finance, (1), 55. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.bla.jfinan.v51y1996i1p55.84
• Fama, E. F., & French, K. R. (2015). A five-factor asset pricing model. Journal of Financial Economics, (1), 1. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.jfinec.v116y2015i1p1.22
• Five concerns with the five-factor model. (2018). Journal of Portfolio Management, 44(4), 71–78. https://doi.org/10.3905/jpm.2018.44.4.071
• Hansen, L. P. (1982). Large Sample Properties of Generalized Method of Moments Estimators. Econometrica, (4), 1029. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.ecm.emetrp.v50y1982i4p1029.54
• John H. Cochrane. (2011). Presidential Address: Discount Rates. Journal of Finance, (4), 1047. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.bla.jfinan.v66y2011i4p1047.1108
• John Y. Campbell, & John H. Cochrane. (1999). By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.BCB5F467
• R. Gibbons, Tephena Ross, & Jay Shanken. (1989). A Test of the Efficiency of a Given Portfolio. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.BE5CEAB1
• Ravi Bansal, & Amir Yaron. (2012). An empirical evaluation of the long-run risks model for asset prices. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.9F0C844E