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COURSE OUTLINE

Asset Pricing

1. General

School

School of Finance and Statistics

Academic Unit

Department of Banking and Financial Management

Level of Studies

Undergraduate

Course code

ΧΡΑΑΞ01

Semester

5th or 7th

Course Title

Asset Pricing

Idependent Teaching Activities

Weekly Teaching Hours

Credits

Lectures
4
7,5

Course Type

Special background

Prerequite Courses

Language of Instruction and Examinations

Greek

Is the course offered to Erasmus Students?

Όχι

Url (Eclass)

https://eclass.unipi.gr/modules/auth/opencourses.php?fc=64

2. Learning Outcomes

Learning Outcomes

The course covers the theory of asset pricing with special emphasis on the consumption-based asset pricing model. It provides a systematic overview of Consumption CAPM, ICAPM, APT and Factor models. Special emphasis is given on empirical asset pricing. The lectures are based on a set of notes and academic articles.

General Competences
  • Search for, analysis and synthesis of data and information, with the use of the necessary technology
  • Decision-making
  • Working in an international environment
  • Production of free, creative and inductive thinking

3. Syllabus

  1. Introduction: Prices, returns and discount rates [notes]
  2. Present value models [notes]
    • Constant discount factors
    • Valuation of bonds
    • Valuation of stocks
    • Data Generating Models of prices and dividends
    • Gordon growth model
    • Time-varying discount factors
    • Log-linear approximation of returns
    • Campbell-Shiller variance decompositions
    • The predictive ability of the dividend-price ratio (empirical applications)
  1. Asset pricing [C, ch. 1, notes, articles]
    • Stochastic Discount Factors and basic CCAPM
  1. Applications of the CCAPM
    • Risk free rate
    • Risk adjustment on asset prices
    • Expected return, risk quantity and price of risk
    • Variation of SDF and efficient frontier of the economy
    • The equity premium puzzle
    • The risk free rate puzzle
  1. Multifactor models [C, ch. 2, 6, 9, notes]
    • CAPM, ICAPM, APT
  1. The role of information: Conditional vs unconditional models [notes, C, ch. 8, Jagannathan and Wang (1996)]
  2. Long-run CCAPM [notes]
  3. Empirical applications: Cross-sectional tests of CAPM, CCAPM, long-run CCAPM.

4. Teaching and Learning Methods - Evaluation

Delivery

Face-to-face

Use of Information and Communications Technology

Use of the Department’s e-class to upload supporting files

Teaching Methods

Activity

Semester Workload

Lectures
52
Independent Study
100,5
Presentations
35
Course Total
187,5

Student Performance Evaluation

Assessment Language: Greek
Assessment methods:

  • 70% final exam, 30% project presentations
  • or, alternatively, 100% final exam.

5. Attached Bibliography

Suggested Bibliography
  1. Lecture Notes (free access in website)
  2. John Cochrane (2001), Asset Pricing, Princeton University Press.
  3. Papers in academic Journals:
  • Campbell, J.Y. (1996): Understanding Risk and Return. Journal of Political Economy, 104, 298-345.
  • Campbell, J. (2000): Asset Pricing at the Millenium, The Journal of Finance vol. LV, No. 4, pp. 1515-1566.
  • Campbell, J.Y. and J.H. Cochrane (2000): Explaining the Poor Performance of Consumption-Based Asset Pricing Models. The Journal of Finance, LV, 2863-2878.
  • Cochrane, J. H. (1997): Where is the Market Going? Uncertain Facts and Novel Theories. Economic Perspectives, Federal Reserve Bank of Chicago.
  • Cochrane, J. H. (1999): New facts in finance. Economic Perspectives, Federal Reserve Bank of Chicago.
  • Cochrane, John H., (2007):Financial Markets and the Real Economy, in Rajnish Mehra, Ed. Handbook of the Equity Premium Elsevier 2007.
  • Cochrane, John H., (2008):“The dog that did not bark: A defense of return predictability “Review of Financial Studies 21 (4) 1533-1575.
  • Cochrane, John H., (2011):Discount rates, Journal of Finance 66, 1047-1108.
  • Lettau, M. and S. Ludvigson (2001): Understanding Trend and Cycle in Asset Values: Bulls, Bears and the Wealth Effect on Consumption. CEPR Discussion Paper No 3104.
  • Lettau, M. and S. Ludvigson (2001a): Measuring and Modelling Variation in the Risk-Return Trade-Off. CEPR Discussion Paper No. 3105.
  • Jagannathan, R. and Z. Wang (1996): The Conditional CAPM and the Cross-Section of Expected Returns. The Journal of Finance, LI, 3-53.
Related Academic Journals

Journal of Finance, Review of Financial Studies, Journal of Financial Economics, CEPR Discussion Papers, Investment Bank Research.