Empirical Asset Pricing ECON5069
- Academic Session: 2020-21
- School: Adam Smith Business School
- Credits: 20
- Level: Level 5 (SCQF level 11)
- Typically Offered: Semester 2
- Available to Visiting Students: No
This course explores the interplay among financial economic theory, the availability of relevant data, and the choice of econometric methodology in the empirical study of asset pricing models. This course includes alternative asset pricing models such as the capital asset pricing model (CAPM), arbitrage pricing theory (APT), stochastic discount factor (SDF), and consumption-based CAPM (CCAPM). Further, econometric techniques such as multivariate regression, seemingly unrelated regression (SURE) and generalised method of moment (GMM) are introduced for the empirical test of the alternative asset pricing models. The practical demonstration of empirical asset pricing tests using the STATA software package is an important component of the course.
10 weekly lectures in 2h blocks
5 computer labs at 1h each
Basic Econometrics (ECON5002), Portfolio Analysis and Investment (ECON5027) or Economic Fundamentals and Financial Markets (ECON5005).
Students are assessed on the basis of coursework (25%) and a final written examination (75%). The coursework will be a short empirical project. The final examination takes the form of a two-hour written paper, with students being required to answer two questions.
Main Assessment In: April/May
The main aim of this course is to introduce students to the core fields of modern finance and financial econometrics. This course overviews asset pricing models and introduces econometrics for the empirical test of asset pricing models. Furthermore, this course emphasises how students construct datasets and test asset pricing models using STATA software package
Intended Learning Outcomes of Course
By the end of this course students will be able to:
■ Critically assess and work with asset pricing models
■ Sharpe-Lintner capital asset pricing model
■ Arbitrage pricing theory
■ Stochastic discount factor model
■ Consumption-based capital asset pricing model
■ perform modern econometric methods
■ Multivariate regression
■ Seemingly unrelated regression
■ Fama-Macbeth regression
■ Generalised Method of Moments
■ construct a dataset for their asset pricing project
■ work with datasets and perform empirical testing
■ use STATA as a programming tool
Students will develop the following transferable skills :
■ Solving problems on the computer
■ Using the STATA software package to solve real world problems
Many of the methods presented in this course apply to other problems in Finance area, such as investment and portfolio etc.
Minimum Requirement for Award of Credits
Students must submit at least 75% by weight of the components (including examinations) of the course's summative assessment.