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2020/2021  KAN-CAEFO1079U  Capital Market Theory

English Title
Capital Market Theory

Course information

Language English
Course ECTS 7.5 ECTS
Type Mandatory
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 Economics and Business Administration
Course coordinator
  • Fabrice Tourre - Department of Finance (FI)
Main academic disciplines
  • Finance
  • Economics
Teaching methods
  • Blended learning
Last updated on 14-12-2020

Relevant links

Learning objectives
  • Explain the concepts, theories, models, and methods for portfolio selection, risk measurement and management, the risk-return tradeoff, and the pricing of stocks, bonds, and derivative securities as discussed during the course.
  • Discuss the theoretical and empirical validity of the central theories and models developed in the course.
  • Apply the theories and models to realistic problems.
  • Implement relevant models using Excel, R or similar computational tools
  • Discuss the role of capital markets, the efficiency of capital markets, and theories about investor behavior
Prerequisites for registering for the exam (activities during the teaching period)
Number of compulsory activities which must be approved (see s. 13 of the Programme Regulations): 1
Compulsory home assignments
In order to be registered for the final exam, students must participate in one of two activities. The main activity will consist in preparing and participating in a group presentation, to take place at two different possible dates (in week 44 and in week 45). In case students fail to attend the group presentation, students will have the chance to participate in a secondary assignment, in the form of an oral exam on a topic still to be determined.

Students will not have extra opportunities to get the required number of compulsory activities approved prior to the ordinary exam. If a student has not received approval of the required number of compulsory activities or has been ill, the student cannot participate in the ordinary exam. If a student prior to the retake is still missing approval for the required number of compulsory activities and meets the pre-conditions set out in the program regulations, an extra assignment is possible. The extra assignment is a 10 page home assignment that will cover the required number of compulsory activities. If approved, the student will be able to attend retake.
Capital Market Theory:
Exam ECTS 7,5
Examination form Home assignment - written product
Individual or group exam Individual exam
Size of written product Max. 10 pages
Students have 4 hours to complete the home assignment
Assignment type Written assignment
Duration Written product to be submitted on specified date and time.
Grading scale 7-point grading scale
Examiner(s) One internal examiner
Exam period Winter
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.
Course content, structure and pedagogical approach

The objective of the course is to develop a deeper understanding of the role and inner workings of financial markets and financial instruments such as stocks, bonds, and derivatives. We will place particular emphasis on helping you develop a systematic way of thinking about and making investment decisions.

The topics we will explore include the following:
• the basics of risk and return
• the investment process and the importance of asset allocation
• how financial markets operate
• portfolio theory and how to form optimal portfolios
• index models, alphas and betas
• equilibrium models of security prices, including the Capital Asset Pricing Model
• security price anomalies such as the size, book-to-market, and momentum effects in stock returns
• the behavioral approach to finance and its role in understanding price anomalies
• the role of fixed income securities in the portfolio
• the use and valuation of derivatives

Description of the teaching methods
Lectures with exercices.
Feedback during the teaching period
Feedback will be provided either as part of group works or discussions in the class.
Student workload
Preparation for and participation in lectures 77 hours
Preparation for and participation in exercise classes 108 hours
Preparation for and participation in exam 21 hours
Expected literature

Bodie, Kane and Marcus, Investments and Portfolio Management, McGraw-Hill, 9th edition


"Financial Markets and Investments" by Claus Munk -- textbook will be provided as pdf in class

Lecture notes

Last updated on 14-12-2020