KTTS4190 Empirical Analysis in Asset Pricing (5 op)

The lecture course covers topics of modern portfolio theory. Building on the Capital Asset Pricing Model (CAPM), the course explores the performance of linear factor models often applied in financial economics. Special attention is paid to the popular Fama and French three-factor, five-factor and six-factor models. The models are critically compared and it will be investigated how well they perform in pricing the cross section of expected returns. Moreover, asset pricing anomalies and commonalities across asset pricing anomalies will be explored. In this regard, special attention is paid to explore the momentum anomaly which appears to be of importance across seemingly unrelated asset markets.

On successful completion of the course, students will be able to

· evaluate the performance of various empirical asset pricing models used in finance

· test asset pricing models using econometric tests

· critically analyze asset pricing anomalies in the cross section of asset returns

· understand trading strategies implemented as zero-cost portfolios and analyze their performance

· risk-adjust zero-cost portfolios and interpret alphas and factor loadings

Contents of the course are related to the following working life skills (generic skills):

· Analytical and critical thinking.

· Problem-solving.

· Statistical modelling.

· Written communicating skills.

Recommended timing for BIF students: 2nd year.
Recommended timing for Finnish M.Sc. degree students: 4rd or 5th year.

Research papers.
Lecture materials will be provided by the instructor.