Asset Pricing I

FIN501B Asset Pricing I

Autumn 2024

Spring 2024
  • Topics

    This course is a PhD level course on empirical asset pricing. Topics include time-series and cross-sectional properties of asset returns, financial frictions and limits to arbitrage in financial markets. The objective of the course is twofold. First, to familiarize students with the econometric methods commonly used in this field. Second, to review recent research in empirical asset pricing. That is, reading current research papers to generate ideas for future research including dissertation topics.

  • Learning outcome

    After the successful completion of this course students are able to:    

    Knowledge:  

    • identify the principal methods of cross-sectional asset pricing
    • select the most prominent asset pricing anomalies
    • apply potential explanations for persistent anomalies
    • describe the core ideas of seminal research papers in this field
    • identify the current most promising working papers in empirical asset pricing

      Skills:  

    • obtaining and processing of large amounts of financial data  
    • formulate empirical tests of asset pricing models
    • implement and test asset pricing models

      Competence:  

    • critically review and discuss research papers
    • identify promising research ideas in the empirical asset pricing literature
    • replicate papers on empirical asset pricing
    • carry out research at the frontier of asset pricing on high international standards

  • Teaching

    Regular lectures.

  • Restricted access

    PhD candidates from NHH as well as PhD candidates from other institutions can take part in the course.

    Course participation of employees in working life or motivated master's students at NHH is subject to the approval from the course responsible on case by case basis.

    There is no cap on the number of students.

  • Recommended prerequisites

    Students should have taken a master-level course in investment or equivalent (e.g, FIE400). The course also assumes familiarity with basic linear algebra, optimization, econometrics, statistics and a programming language like R, Matlab, etc.

  • Required prerequisites

    Students must take FIN501A prior to FIN501B.

  • Assessment

    The grade is based on a portfolio consisting of class participation (approximately 15%), a paper discussion (approximately 40%), a final project (approximately 40%), and a reflection note (approximately 5%). One grade is given for the entire portfolio.

    Class participation is assessed during the first part of the course when the basic empirical asset pricing literature will be presented. The assessment of class participation will reflect the quality of a student's comments and insights, as well as the intensity of participation. It tests whether students correctly understand the fundamentals of cross-sectional asset pricing. 

    Next, students have to discuss a research paper which involves summarizing and critically discussing a research paper. This is an important next step in become a successful researcher in empirical asset pricing. The students will receive feedback on whether they have correctly identified a paper's incremental contribution, its strengths and weaknesses and how to overcome or mitigate potential shortcomings. Feedback on this part of the assessment prepares students to write good referee reports for journal.

    The final project is the ultimate step in the whole learning process and consists of replicating an empirical asset pricing paper and the presentation of the results. This allows testing whether the students fully and correctly understand the details of a particular research paper. This is an important step towards writing their own research papers and to learn how to successfully present the results. 

    Finally, the students have to write a reflection note where they are supposed to reflect on their learning and development during the course.

  • Grading Scale

    Pass/Fail

  • Literature

    John H. Cochrane, Asset Pricing: Revised Edition, Princeton University Press, 2005.

Overview

ECTS Credits
5
Teaching language
English
Semester

Autumn. Not offered Autumn 2024.

Course responsible

Professor Nils Friewald, Department of Finance, NHH