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2016/2017  KAN-CFIVO1005U  Empirical Finance

English Title
Empirical Finance

Course information
Language English
Course ECTS 7.5 ECTS
Type Mandatory
Level Full Degree Master
Duration One Semester
Start time of the course Spring
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Claus Munk - Department of Finance (FI)
  • Lena Jaroszek - Department of Finance (FI)
Main academic disciplines
  • Finance
  • Statistics and quantitative methods
Last updated on 09-12-2016
Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors: Upon completion of this course, students should be able to:
  • Understand current and historical facts about the fundamental financial markets variables that are relevant for financial decision-making in many contexts (e.g., the market risk premium, P/E ratios)
  • Use financial data and finance theory to make investment and corporate finance decisions
  • Apply many of the core models used in financial econometrics and understand some of their key advantages and shortcomings
  • Critically evaluate information from the business press and financial market news
Examination
Empirical Finance:
Exam ECTS 7,5
Examination form Home assignment - written product
Individual or group exam Group exam
Number of people in the group 3-4
Size of written product Max. 15 pages
Assignment type Project
Duration 72 hours to prepare
Grading scale 7-step scale
Examiner(s) Internal examiner and external examiner
Exam period Spring
Make-up exam/re-exam
Same examination form as the ordinary exam
Description of the exam procedure

Students write reports in groups of 3 or 4 based on a specific assignment formulated by the teacher.
As each student receives an individual grade, each group member must identify the exam sections he/she has authored.

 

Please note an exemption is required if a student wishes to complete the assignment individually.
Course content and structure

Financial markets provide vast amounts of data that can be highly informative for financial decisions. This course provides an introduction to the analysis of financial data using quantitative techniques. Students will apply such techniques to address practical financial applications. The course will build skills that allow you to transform such data into decision-relevant information. Finally, you will learn to interpret financial information using finance theory. This course provides a framework for making sound financial decisions and it focuses on applying the main concepts of finance theory.

The emphasis is on a practical approach: During exercises, and in particular by solving group assignments, students learn to apply models and methods in a hands-on fashion to real problems, and simultaneously highlight their limitations in real situations.

Examples of topics covered are: diversification, the tradeoff between risk and return, market efficiency, return predictability, the capital asset pricing model, the use of derivatives for hedging, and risk management.
Teaching methods
Lectures are supplemented with exercises. Furthermore, the course will include a minimum of two voluntary assignments to be solved in groups of 3-4 students. The assignments will require students to write their own procedures and to use real market data, which will help to truly appreciate the content of the course and prepare for the graded take home assignment. The lecturer offers feedback on the exercise assignments handed in before the due date. The assignments include theoretical considerations, programming (in Excel and Stata), working with real financial data, and writing a report.
This course assumes a working knowledge of statistics. Students must also be proficient in Excel, the use of the Solver (Excel’s built-in optimizer), and willing to work with Stata.
Student workload
Lectures 33 hours
Preparation for lectures 66 hours
Voluntary assignments 64 hours
Written part of exam 24 hours
Preparations for exam 19 hours
Expected literature

The course is based on the textbook by Cuthbertson and Nitzsche: “Quantitative Financial Economics”; 2nd ed., 2004, Wiley.

Supplementary materials are lecture notes, articles as well as two further textbooks of which only a few chapters are relevant. These further textbooks are:

Campbell, Lo, and MacKinlay: “The Econometrics of Financial Markets”; 1997, Princeton Univ. Press.

McNeil, Embrechts, and Frey: “Quantitative Risk Management”; 2005, Princeton Univ. Press.
Last updated on 09-12-2016