KTTS4130 Investments and Asset Pricing (5 op)

The lecture course gives a comprehensive treatment of basic theories of financial economics with an emphasis on quantitative financial economics. The key points are the efficient market hypothesis (EMH), portfolio diversification, the Capital Asset Pricing Model (CAPM), the arbitrage pricing theory (APT) and the consumption CAPM (CCAPM) and their applications.

Course themes are related to the following UN Sustainable Development Goals:

SDG 8: Decent Work and Economic Growth: Asset pricing theories are fundamental to understanding financial markets, which in turn impact economic growth and the creation of decent jobs. A stable and well-functioning financial system is essential for sustainable economic development.

SDG 10: Reduced Inequality: Asset pricing theories can influence wealth distribution and inequality. Understanding how financial markets operate is crucial for addressing issues related to the fair distribution of resources and opportunities.

SDG 12: Responsible Consumption and Production: Asset pricing theories can be linked to responsible investment practices. Investors can use these theories to assess the environmental, social, and governance (ESG) factors of assets, promoting sustainable and responsible consumption and production.

SDG 16: Peace, Justice, and Strong Institutions: A solid understanding of asset pricing theories contributes to the stability and efficiency of financial markets, which are integral to the development of strong institutions and the promotion of justice within economic systems.

On successful completion of the course, students will be able to:
- recognize, report, and apply theories of financial economics;
- evaluate and report under what kind of conditions and assumptions theories can be applied and if theories are consistent with the empirical observations;
- recognize, report, and apply empirical tests applied to theories and hypothesis of financial economics;
- analyze behavior of financial markets and pricing of financial instruments by applying theories of financial economics, and to report the analysis results.

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

-analytic, systematic thinking skills;

-information searching skills;

-ability to learn and adopt new things;

-creative problem solving;

-mobilizing others, cooperating;

-financial & funding understanding;

-causative modelling;

-oral and written communicating skills.

Recommended timing for BIF students: 1st year.
Recommended timing for Finnish M.Sc. degree students: 4th year.

KTTS1220 Mathematical Economics / KTTA1220 Mathematical Economics
KTTA1120 Introduction to Econometrics (recommended)

Bodie, Z., Kane, A. and Marcus, A.J. 2024. Investments, 13th (or earlier) edition, McGraw-Hill.

Cuthbertson, K. & Nitzsche, D. 2004. Quantitative Financial Economics: Stocks, Bond and Foreign Exchange, 2nd edition.