This course develops modern asset pricing theory and trains students in empirical investigations of asset pricing models. It explains how to use discrete-time and continuous-time models. We preview the classic issues in finance and think about asset pricing in a simple economic equilibrium. We study contingent claims and learn how to value them using discount factors. We explore the mean-variance frontier and beta representations, and study the classic linear models such as CAPM, ICAPM and APT. We learn how to use GMM and regression-based techniques to estimate and evaluate asset pricing models. We value options and bonds, learn about portfolio theory and explore the intersection of asset pricing and macro-economics.
Learning Outcomes
Upon successful completion, students will have the knowledge and skills to:
On satisfying the requirements for this course, students will have the knowledge and skills to:
- Discuss the main theoretical concepts and empirical methods of modern asset pricing
- Critically review previous work in asset pricing
- Be able to derive testable hypotheses in asset pricing and methods to test them
- Communicate various topics of modern asset pricing to a diverse audience
Indicative Assessment
Typical assessment may include, but is not restricted to: problem sets, a referee report, and a final project.The ANU uses Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. While the use of Turnitin is not mandatory, the ANU highly recommends Turnitin is used by both teaching staff and students. For additional information regarding Turnitin please visit the ANU Online website.
Workload
10 hours per week consisting of a combination of lectures, assignments, and private study timeRequisite and Incompatibility
You will need to contact the Rsch Sch of Finance, Actuarial Studies & App Stats to request a permission code to enrol in this course.
Prescribed Texts
The required text is Cochrane, John H., 2001, ``Asset Pricing,'' Princeton University Press, Princeton, New Jersey. The assigned readings for each topic are:
1. An introduction to continuous-time models
Lecture notes
2. Facts, basic models and classic issues in finance
Ch 20.1-2, Ch 1-2
Lucas (1978, Asset Prices in an Exchange Economy)
3. Valuation of contingent claims
Ch 3
4. Discount factors
Ch 4
5. Mean-variance frontier
Ch 5, Ch 6.1-4, Ch 7, Ch 8.1-2
6. Factor pricing models
Readings: Ch 9
Fama and French (1996, Multifactor Explanations of Asset Pricing Anomalies)
Fama and French (2008, Dissecting Anomalies)
7. Estimating and evaluating asset pricing models
Ch 10-12
8. Option pricing
Ch 17
9. Term structure modelling
Ch 19.1-3, Ch 20.1
Cochrane and Piazzesi (2005, 2008)
Lustig, Roussanov, and Verdelhan (2011, Common Risk Factors in Currency Markets)
10. Portfolio theory
Cochrane (2011) pg 1079-1086
11. Asset pricing and macro-economics
Ch 20.1, Ch 21.1-3
Cochrane (2011, Discount factors) pg 1047-58
Cochrane (2007, Dog that did not bark)
Campbell and Cochrane (1999, By force of habit)
Bansal, Kiku and Yaron (2012, Long-run risk model)
Assumed Knowledge
Students will require a solid background in finance, econometrics and macro-economics.Fees
Tuition fees are for the academic year indicated at the top of the page.
If you are a domestic graduate coursework or international student you will be required to pay tuition fees. Tuition fees are indexed annually. Further information for domestic and international students about tuition and other fees can be found at Fees.
- Student Contribution Band:
- 3
- Unit value:
- 6 units
If you are an undergraduate student and have been offered a Commonwealth supported place, your fees are set by the Australian Government for each course. At ANU 1 EFTSL is 48 units (normally 8 x 6-unit courses). You can find your student contribution amount for each course at Fees. Where there is a unit range displayed for this course, not all unit options below may be available.
| Units | EFTSL |
|---|---|
| 6.00 | 0.12500 |
Course fees
- Domestic fee paying students
| Year | Fee |
|---|---|
| 2018 | $4080 |
- International fee paying students
| Year | Fee |
|---|---|
| 2018 | $5400 |
Offerings, Dates and Class Summary Links
ANU utilises MyTimetable to enable students to view the timetable for their enrolled courses, browse, then self-allocate to small teaching activities / tutorials so they can better plan their time. Find out more on the Timetable webpage.
Class summaries, if available, can be accessed by clicking on the View link for the relevant class number.
Second Semester
| Class number | Class start date | Last day to enrol | Census date | Class end date | Mode Of Delivery | Class Summary |
|---|---|---|---|---|---|---|
| 9710 | 23 Jul 2018 | 30 Jul 2018 | 31 Aug 2018 | 26 Oct 2018 | In Person | N/A |
