3403715: Empirical finance

Description

Foundations of Modern Standard Capital Market Theory

• Capital Asset Pricing Model
• Information Efficiency Hypothesis

• Typical Market Anomalies
• Speculative Bubbles

• Single-Stage Trading Procedure in the Case of Uncertain Information
• Multi-Stage Trading Procedure and Portfolio Development

• Distribution Assumptions of Single Transaction-Based ROI Analysis
• Concept of Stable Pareto Distribution

• The ARCH Model

• Introduction and Background
• Event Studies in the Short Term
• Event-Studies in the Long Term

Learning Outcomes

• Showing the meaning of the CAPM and capital market efficiency for capital market theory
• Listing and diagnosing market anomalies
• Identifying market anomalies by means of empirical data
• Understanding the approach to information processing in the laboratory
• Explaining information processing in real capital markets
• Comparing statistical characteristics of stock and index yields
• Identifying and scrutinising risk factors in stock yields
• Explaining the methodology of event studies

Lectures Method

Interactive lecture with exercises

Literature

Required reading:

• Black, F./Jensen, M./Scholes, M. (1972). The capital asset pricing model: some empirircal tests. In Jensen, M. (ed.) (1972). Studies in the Theory of Capital Markets. New York: Praeger Publishers, pp. 79-121.
• Fama, E. F. et al. (1969). The adjustment of stock prices to new information. International Economic Review 10, pp. 1-21.
• Fama, E.F. /MacBeth, J.D. (1973). Risk, return and equilibrium: empirical tests. Journal of Political Economy, Vol 81, pp. 607-663.
• Fama, E.F. /French, K.R. (1992). The cross-section of expected stock returns. The Journal of Finance, Vol 47, pp. 427-465.
• MacKinley, A.C. (1997). Event studies in economics and finance. Journal of Economic Literature, Vol. 35, pp. 13-39.
• Peterson, P.P. (1989). Event studies: A review of issues and methodology, prices to new information. Quarterly Journal of Business and Economics, Vol 28, pp. 36-66.

• Benninga, S. (2008). Financial Modeling (Third edition). Cambridge, MA: MIT Press

Materials

Lecture slides, exercises, sample questions will be available on the moodle