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ASSET PRICING AND PORTFOLIO CHOICE
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ASSET PRICING AND PORTFOLIO CHOICE
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Academic year 2021/2022
- Course ID
- ECO0262
- Teaching staff
- Giovanna Nicodano (Lecturer)
Raffaele Corvino (Lecturer)
Milo Bianchi (Lecturer) - Degree course
- Finance
Insurance and Statistics - Year
- 1st year
- Teaching period
- Second semester
- Type
- Distinctive
- Credits/Recognition
- 9
- Course disciplinary sector (SSD)
- SECS-P/01 - economia politica
- Delivery
- Blended
- Language
- English
- Attendance
- Obligatory
- Type of examination
- Written
- Prerequisites
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Fundamentals of calculus, statistics, econometrics, finance are prerequisites.If you are not familiar with financial markets and institutions, please cover ch. 1-5 of the following textbook in the Fall.
Bodie Z., Kane A., Marcus A.J., Investments, 10th edition (or later)If you were never exposed to finance before, please check also Ch. 6-11, 13, 24. We will cover them but relatively quickly.
- Propedeutic for
- Advanced Asset Pricing (2 year, 6 CFU)
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Sommario del corso
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Course objectives
Provide concepts and methods underlying modern financial analysis. The focus will be on asset pricing and quantitative investment management. There will also be an introduction to behavioral finance. Time allowing, we will cover some other topics.- Oggetto:
Results of learning outcomes
Students understand risks, their interactions, their management through portfolio choice, and their value.- Oggetto:
Course delivery
The course is based on lectures and at least as many hours of at‐home reading and solving exercises. Q&A in the classroom is strongly encouraged, also after discussing in small groups the topic that has been covered.Students will be invited to attend finance research seminars (webinars) and conferences at Collegio Carlo Alberto. See schedule on Moodle- Oggetto:
Learning assessment methods
The full exam tests both basic and advanced knowledge.
Basics: 10 multiple choice questions drawn from Bodie Kane and Marcus in 10 minutes. If more than half of the answers are wrong, the advanced part will not be corrected.
I will offer a test of the basics during the course. Those who pass it will not have to retake it in the Summer 2022.
Advanced Material: there will be two composite questions or exercises, each on a different topic, with limited space for precise answers to the questions. See the sample exam on Moodle.
Grades: the test of the basics is worth up to 10; composite questions on advanced material will be worth 10 points each.
In case exams revert online due to Covid, there will be an oral exam to validate the written grade in case is exceeds 26/30
Only in case of a covid emergency, the exam will be both ON MOODLE and WEBEX. You will receive a link the day before the exam, provided you signed up on ESSE3 as usual by the deadline. Please sign in Webex with your first and last name. Turn on your camera (facing you) and mic 15 minutes before the start of the Moodle test/exam and have your Smart Card ready. Log in Moodle 15 minutes before the exam.
DATA-BASED OPTION: it is possible to apply in order to substitute the Advanced Exam with a MATLAB-based exam (max grade 16/30). We will collect applications by students wishing to pursue this option on April 26.
A necessary condition for being able to take this option is to attend and participate to all the advanced lectures, including the ones on behavioural finance. You will be asked to perform a proper quantitative analysis on stock market data, applying the programming skills and economics acquired during the course. Students will have to compose a Matlab script, running the commands they think may be useful to complete the tasks. The Matlab script must be correctly working. Then, the students will have to interpret their results through the lens of the economic and financial background covered during the lectures. The final output of this option consists of two files: (1) the Matlab script, and (2) a Word document, where students will report their results and comments.
Timing: the tasks, together with the data, will be provided by June 19th. The two output files must be submitted by July 10th. The tasks must be completed individually.
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Support activities
Lecture notes on advanced topics and other materials are distributed through the Moodle forum.
Please register online before the beginning of the course, on Moodle, adding a passport-like picture of yourself. Ensure you select the academic year 2021-2022.
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Program
First Part: Asset Pricing (Giovanna Nicodano)
- stylized facts, risk and return, Mean Variance analysis, capm and apt, performance evaluation, stochastic discount factor, consumption-capm
Second Part: Applications (Raffaele Corvino)
- portfolio selection, efficient frontier, utility and optimal portfolio, diversification, capm and estimation
Third Part: Some Topics in Advanced Portfolio Choice drawn from the list below (Giovanna Nicodano)
- another look at returns
- long term portfolio choice
- hedging and portfolio choice: households' portfolio choice
- accounting for illiquidity and illiquidity risk
- accounting for non Gaussian returns
- ESG, pricing and portfolio choice
- estimation risk and Black Litterman
Fourth Part: Behavioral Finance (Milo Bianchi)
- prospect theory, ambiguity aversion, time inconsistency, overconfidence, limited attention
Suggested readings and bibliography
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- The complete reading list wil be available on Moodle. It will comprise both book chapters and scientific papers.
Bodie Kane and Marcus ch. 5-11, 13, 24
Cochrane J., Asset Pricing, Princeton University Press, 1999, Ch.1,2, 4.1,4.2,4.3, 5.1, 5.2,5.3 .
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Class schedule
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Note
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