Econometrics, Statistics and Empirical Economics

S412 Empirical Asset Pricing

LecturerProf. Dr. Joachim Grammig
Level1. Year M.Sc.
ProfilesM.Sc. in International Economics and Finance,
M.Sc. in Accounting and Finance,
M.Sc. in General Management,
M.Sc. in International Economics and American/East Asian/European/Middle Eastern Studies
LanguageEnglish
Time and Place

Monday 12:30 - 2 p.m. and Tuesday 12 - 2 p.m.

Room 332, Mohlstraße 36

Examwritten exam, assignments
Credit Points7.5 ECTS

7 LP
Course Ref. No.S412

Content

The course blends financial economics theory and econometric modelling. The Generalized Method of Moments (GMM) is introduced as a suitable estimation strategy that exploits unconditional moment conditions implied by the basic asset pricing equation. The basic asset pricing equation, which states that asset prices emerge as the conditional expeted value of payoffs weighted by the marginal rate of substitution (the so-called stochastic discount factor, SDF), is derived from the intertemporal decision problem of an investor. Various popular asset pricing models like the CAPM, and the Fama-French-Model are shown to be special cases of the basic asset pricing equation with a specific SDF. The course discusses nonlinear models for the stochastic discount factor, which can be estimated by GMM, and models with a linear SDF, like the CAPM, which can be estimated by regression-based techniques.

Practical class

The methods are applied in practical class in the PC-laboratory. Students have to hand in assignments which are part of the final grade.

The weekly practical class is scheduled for Monday 4-6 p.m. (PC-lab). More detailed information regarding the practical class and the required assignments will be given in the first lecture.