Code:

BERMASC006

Study year:

2007-2008

Long name:

Advanced Asset Pricing

ECTS:

5

Language:

English

Lecturer(s):

Dr. H.J.W.G. Kole, dr. M. Szymanowska, prof. dr. M.J.C.M. Verbeek

Faculty:

ESE / RSM Erasmus University

Number of lectures:

10

Hours per lecture:

3

Course contents:

The aim of this course is to provide a profound and state-of-the-art insight into asset pricing, both from a theoretical and empirical perspective. The field of asset pricing aims to explain the prices of financial assets such as stocks, fixed income instruments and derivative securities. The field is highly relevant for research in financial economics, because asset pricing models form the basis for any study in investments and are also fundamental to many financial management applications such as capital budgeting, risk management, portfolio selection and performance evaluation.

Building on the general pricing kernel framework laid out by Cochrane (2005), this course goes into more details of the advances in the field in the last 10 to 15 years. The course is set up in a seminar-style with presentations and discussions centred on different topics in the field. We will study the advances in factor models after Fama & French (JF 1992, JFE 1993) and Carhart (JF 1997), such as the liquidity factor of Pastor & Stambaugh (JPE 2003) and the idiosyncratic volatility factor of Ang et al. (JF 2006). A second field of interest is formed by extensions of utility-based models, such as habit formation models (Campbell and Cochrane, JPE, 1999) and polynomial pricing kernels (Harvey and Siddique, JF 2000; Dittmar, JF 2002). The third subfield we consider comprises advances in consumption-based models (Jagannathan and Wang, JF, 2007; Parker and Julliard, JPE, 2005) and production-based models (Cochrane, JPE, 1996, Li et al. JB 2005).

Examination:

Presentations and written essay.

Literature:

Journal articles, t.b.a.

Additional Information:

This course is a follow-up of the course Asset Pricing FEM11008. You need to have passed the FEM11008 course (or the Quantitative Finance companion course FEM21003), taught in the fall period to enrol in this course.