2024/2025 KANCEADO1002U Asset Pricing
English Title  
Asset Pricing 
Course information 

Language  English 
Course ECTS  7.5 ECTS 
Type  Mandatory (also 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 
Max. participants  50 
Study board 
Study Board for OECON and ECFI

Course coordinator  


Main academic disciplines  


Teaching methods  


Last updated on 16012024 
Relevant links 
Learning objectives  


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 42 confrontation hours and there is a high level of
interaction betw. lecturer and students, and in general a high work
load.
The course assumes mathematical knowledge up to advanced college level or 1st year undergraduate level. This means basic analysis, univariate calculus, linear algebra, probability, and matrix algebra. To sign up send a 1page motivational letter, a 1page CV, and a grade transcript to ily.stu@cbs.dk before the registration deadline for elective courses. You may find the registration deadlines on my.cbs.dk ( https://studentcbs.sharepoint.com/graduate/pages/registrationforelectives.aspx ). Please also remember to sign up through the online registration. 

Examination  
The exam in the subject consists of two parts:


Course content, structure and pedagogical approach  
Asset pricing theory is the subject of uncertain cash flow valuation in terms of risk adjustments. Empirical work typically infers these risk adjustments, imbedded in low average prices, from high average returns. For example, the equity risk premium inferred from timeseries evidence on returns suggests an adjustment that is an order of magnitude too large to be rationalised by neoclassical theory. Return anomalies are also pervasive in the crosssection of assets as evidenced by a vast literature that rejects the Capital Asset Pricing Model in favour of a multiple priced risk factors.
This course provides a first principles account of discrete time 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 a single period setting. The stochastic discount factor approach to asset pricing is introduced. We then turn to dynamic models of asset pricing where we discuss classic asset pricing anomalies in the context of consumption based models. We introduce some well studied solutions to these anomalies including the introduction of EpsteinZin preferences, ambiguity aversion and habit formation. Finally, we discuss production based models and talk about intertemporal risk.
The syllabus is both exciting and extensive covering:
• Choice Under Uncertainty, Utility Functions,
and Risk Aversion
• Consumption Based Models


Description of the teaching methods  
The course is taught using blended learning:
• prerecorded lectures • oncampus classes with quizzes and exercises • online discussion forum 

Feedback during the teaching period  
The students will receive continuous feedback in the form of regular inclass quizzes with oral discussion and in an online discussion forum. In addition, the students will receive feedback related to the midterm exam and can receive more individual feedback in office hours.  
Student workload  


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: • ‘Finance Decisions and Markets: A Course in
Asset Pricing’, John Campbell
