Self-Study
33
Intermediate
Finance
Previous knowledge of theoretical asset pricing and basic econometric techniques.

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Course Description

Empirical Asset Pricing: The Cross Section of Stock Returns is a comprehensive overview of the most important findings of empirical asset pricing research. The course begins with thorough expositions of the most prevalent econometric techniques with in-depth discussions of the implementation and interpretation of results illustrated through detailed examples. The second part of the course applies these techniques to demonstrate the most salient patterns observed in stock returns. Other topics covered include the driving forces behind the patterns observed in the stock market and an extensive set of results that serve as a reference for practitioners and academics alike.



Instructor

Turan G. Bali

Turan G. Bali, PhD, is the Robert Parker Chair Professor of Finance in the McDonough School of Business at Georgetown University. The recipient of the 2014 Jack Treynor prize, he is the co-author of Mathematical Methods for Finance: Tools for Asset and Risk Management, also published by Wiley.



Course Specifics

Finance
Apr 4, 2017
Previous knowledge of theoretical asset pricing and basic econometric techniques.
SS3168027
643
None


Compliance Information

103220
Qualifies for CA Fraud: No


Learning Objectives

Upon successful completion of this course, participants will be able to:

Chapter 1

  • Identify the references used within a panel of data in order to interpret the results
  • Note the criteria used for different variables used by researchers in the various studies presented in order to identify the level of specificity within each study
  • Recognize the defining characteristics of winsorization and truncation, noting the differences between each
  • Note the purpose and methodology of a Newey and West (1987) adjustment

Chapter 2

  • Identify the critical aspects of summary statistics, noting the the terms and symbols used to represent the data as well as its implementation
  • Recognize the process used by the researchers to present the data used in the study as well as the interpretation of the results, noting applicable drawbacks for reporting statistics

Chapter 3

  • Recognize the methodologies used to calculate and present correlations between variables, noting important terminology associated with correlation measures
  • Recognize the techniques used to present correlation data as well as the interpretation of the results

Chapter 4

  • Identify the qualities of persistence as well as the uses for persistence analysis, noting the importance of determining if a variable is persistent and the calculation process used in persistence analysis
  • Recall the presented persistence data, noting applicable interpretations of the results

Chapter 5

  • Note the objectives and terminology associated with portfolio analysis as well as its application and benefits
  • Identify the different types of portfolio analysis approaches, noting the various components of each as well as the procedures performed to calculate values
  • Recognize the techniques used to present the results of portfolio analysis as well as the interpretation of the results

Chapter 6

  • Identify the purpose and requirements associated with Fama and MacBeth 1973 (FM) regression analysis, noting the implementation process
  • Note applicable interpretations and presentations associated with FM regressions

Chapter 7

  • Note the characteristics and composition of the U.S.-based common stocks that are commonly used in empirical asset pricing
  • Note the composition and use of the Center for Research in Security Prices (CRSP) database in empirical asset pricing
  • Note the composition of the CRSP U.S.-based common stock sample that will be used as a base for empirical asset analysis in the course
  • Recognize the purpose, historical significance, and terminology associated with the Market Factor and the CAPM Risk Model, noting applicable assumptions and predictions

Chapter 8

  • Identify characteristics associated with the Capital Asset Pricing Model (CAPM), noting the process of estimating beta, issues that the process addresses, and the resulting predictions
  • Specify summary statistics for each measure of beta, the correlations among the CAPM measures, and the persistence of variables that measure market beta, noting possible interpretations and conclusions that can be drawn
  • Recognize the relation between beta and future stock returns through the performance of equal-weighted portfolio analysis, value-weighted portfolio analysis, and Fama-MacBeth regression analysis, noting the applicable results of each analysis

Chapter 9

  • Note the components and characteristics of the Size effect, including the process of calculating market capitalization
  • Specify summary statistics, correlations, and persistence rates related to the Size effect
  • Identify the characteristics and usage of univariate portfolio analysis, bivariate portfolio analysis, and Fama-MacBeth regression analysis as they relate to Size effect and stock returns
  • Note the effect of the Size factor

Chapter 10

  • Identify the components and characteristics related to value premium, noting important researchers and their results
  • Note the calculations used to obtain book-to-market ratios, the results of summary statistics, and application correlations and persistence factors
  • Recognize methodologies used to analyze and test for the value premium and interpret the results of the analyses
  • Note the components of the Fama and French Three-Factor Model and how it is used to calculate the value premium

Chapter 11

  • Recognize the characteristics of the momentum effect, noting ways to measure this effect, summary statistics, and applicable correlations
  • Recognize the characteristics and usage of univariate portfolio analysis, bivariate portfolio analysis, and FM Regression analysis on momentum and stock returns, noting applicable interpretations that can be made from the data
  • Identify the components of the Fama, French, and Carhart Four-Factor Model

Chapter 12

  • Note the characteristics of short-term reversal effect, ways to measure and summarize the results of this effect, and applicable correlations
  • Identify the results of univariate portfolio analysis as well as bivariate portfolio analyses on reversal and stock returns, noting driving factors in the analyses
  • Note the characteristics and results of Fama-MacBeth regressions with regards to short-term reversal
  • Note the characteristics of the various factors that influence reversal

Chapter 13

  • Identify assumptions associated with liquidity, commonly used measures and their characteristics, and the findings of researchers that have studied the components of liquidity
  • Note correlations and persistence as they relate to liquidity
  • Recognize the different analyses performed on liquidity and stock returns, noting components involved in these analyses as well as the calculations and interpretations of the results
  • Identify factors that affect liquidity

Chapter 14

  • Identify important researchers that study skewness, noting the results of their research
  • Recognize the correlations pertaining to total skewness, co-skewness, idiosyncratic skewness as well as other variables that can skew data and results
  • Identify persistence as it pertains to total skewness, co-skewness, idiosyncratic skewness
  • Evaluate and interpret the results of the presented examples of skewness and stock returns that use univariate portfolio analysis and Fama-MacBeth Regressions, noting the relationship of skewness to stock returns

Chapter 15

  • Note the defining characteristics and functions of idiosyncratic and total volatility as well as important researchers and their hypotheses regarding these volatilities
  • Identify the characteristics and models used to measure total volatility as well as idiosyncratic volatility
  • Compare the presented results of idiosyncratic volatility and stock returns that use univariate portfolio analysis, bivariate portfolio analysis, FM regression analysis, and cumulative returns of IdioVolFF,1M Portfolio, identifying applicable calculations, correlations, and persistence

Chapter 16

  • Identify terminology associated with and the characteristics of liquid and illiquid stocks, noting the approaches and rationales for eliminating illiquid stocks from samples
  • Evaluate the resulting portfolio analyses using the restricted samples, identifying correlations and persistence as well as calculating expected stock returns using univariate portfolio analysis and FM Regression analysis

Chapter 17

  • Recognize the characteristics and components of option-implied volatility, noting variables, statistics, correlations, and persistence as well as stock and option returns
  • Identify important researchers with regards to option-implied volatility, noting the results of their research
  • Evaluate the results of stock and option returns for the presented example portfolios, noting applicable interpretations and hypotheses of the data

Chapter 18

  • Recognize the characteristics and components of other stock return predictors such as asset growth, investor sentiment, investor attention, differences of opinion, profitability and investment, and lottery demand
  • Note the researchers doing work in these areas as well as the factors documented and the hypotheses drawn from these theories


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