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2016/2017  KAN-COECO1050U  Asset Pricing

English Title
Asset Pricing

Course information
Language English
Course ECTS 7.5 ECTS
Type Mandatory offered as elective
Level Full Degree Master
Duration One Semester
Start time of the course Autumn
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for MSc in Advanced Economics and Finance
Course coordinator
  • Paul Whelan - Department of Finance (FI)
Main academic disciplines
  • Finance
  • Economics
Last updated on 09-06-2017
Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors: Students are required to be able to answer satisfactorily questions corresponding to the assigned text books and to the level of applied classes on the following subjects:

1. Choice Under Uncertainty, Utility Functions, and Risk Aversion
2. Single Period Portfolio Choice
3. Mean-Variance Analysis and the Capital Asset Pricing Model
4. The Stochastic Discount Factor Approach to Asset Pricing
5. Dynamic Programming and Multi-Period Portfolio Choice
6. The Lucas Tree Economy
7. Price-Dividend Predictability

Satisfactory answers must be correct, clear, and explained at an academic level consistent with class material and applied class solutions.
Course prerequisites
This is a mandatory course for the MSc in Advanced Economics and Finance. It is assumed that students have knowledge similar to the entry requirements for this programme. The course has 45 confrontation hours and there is a high level of interaction betw. lecturer and students, and in general a high work load.

To sign up send a 1-page motivational letter and a grade transcript to oecon.eco@cbs.dk no later than 20 June 2017. Please also remember to sign up through the online registration
Prerequisites for registering for the exam
Number of mandatory activities: 2
Compulsory assignments (assessed approved/not approved)
The students must hand in two written assignments during the course and must pass them both on an approved/not approved basis before the final exam.

If a student - due to documented illness or failed attempts - does not pass both assignments, the student will be given a final chance to retake this part of the course by handing in a new assignment prior to the final exam.

The two group course works are designed to explore:
1. Empirical tests of the CAPM
2. Time-series predictability of stock returns vs dividend growth.

The assignments are made in Groups of three students.
Examination
Asset Pricing:
Exam ECTS 7,5
Examination form Written sit-in exam
Individual or group exam Individual exam
Assignment type Written assignment
Duration 3 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Winter
Aids allowed to bring to the exam Limited aids, see the list below:
  • Written sit-in-exam with pen and paper
  • Approved calculators: HP 10bII+ and Texas BA II Plus
  • Dictionaries (only some, see specification below)
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Description of the exam procedure

Only language dictionaries are allowed.

 

Allowed calculators are:

 

• HP 10bII
• Texas BA II Plus

 

Three-hour closed book exam split in two sections:

  1. Five short questions couting for 65% of total exam grade
  2. One long question couting for 35% of total exam grade

Students must answer all questions in Section 1. and will be given a choice of questions in Section 2.
Course content and structure

This course provides a rst principles account of discrete time asset pricing theory with a focus on real world applications. By the end of the course, students will have been exposed to the key concepts in modern asset pricing theory. The course begins by discussing how to represent investor preferences. The utility function representation of preferences is then applied to a host of optimal portfolio choice problems in both single and multi period settings.
Special cases studied in detail include the Capital Asset Pricing Model and the Lucas Tree Economy. The empirical validity and practical use of such models is explored in practical assignments.

 

 
Teaching methods
The course consists of both lectures and problem classes.
Approximately 2/3 of the course consists of lectures with the remaining 1/3 problem classes.
A full time-table will be published on learn.cbs.dk in advance of the course start date.
Student workload
Lectures 42 hours
Preparation 139 hours
Exam 25 hours
Further Information

PhD students taking the CBS PhD course in Asset Pricing are following a large part of this course and may be present during the lecture sessions.
Expected literature

Indicative: 

  • Pennacchi: Theory of Asset Pricing.
  • Back: Asset Pricing and Portfolio Choice Theory.
  • Cochrane: Asset Pricing.
  • Course notes 
Last updated on 09-06-2017