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2024/2025 KAN-CEADO1002U Asset Pricing
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| Asset Pricing |
Course information |
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| 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
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| Last updated on 16-01-2024 | |
Relevant links |
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| 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 under-graduate level. This means basic analysis, univariate calculus, linear algebra, probability, and matrix algebra. To sign up send a 1-page motivational letter, a 1-page 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/registration-for-electives.aspx ). Please also remember to sign up through the online registration. |
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| Examination | ||||||||||||||||||||||||||||||||||||||||||||||||
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The exam in the subject consists of two parts:
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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 time-series 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 cross-section 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 Epstein-Zin 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
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| Description of the teaching methods | ||||||||||||||||||||||||||||||||||||||||||||||||
| The course is taught using blended learning:
• pre-recorded lectures • on-campus classes with quizzes and exercises • online discussion forum |
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| Feedback during the teaching period | ||||||||||||||||||||||||||||||||||||||||||||||||
| The students will receive continuous feedback in the form of regular in-class 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. | ||||||||||||||||||||||||||||||||||||||||||||||||
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| Further Information | ||||||||||||||||||||||||||||||||||||||||||||||||
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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. |
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| Expected literature | ||||||||||||||||||||||||||||||||||||||||||||||||
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Indicative: • ‘Finance Decisions and Markets: A Course in
Asset Pricing’, John Campbell
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