Asset Pricing

5th or 7th Semester

At A Glance

Course Code

ΧΡΑΑΞ01

Course Type

Special background

Teaching Language

Greek

Is the course offered to Erasmus Students?

Όχι

Teaching Delivery

Face-to-face

Use of Information and Communications Technology

Use of the Department’s e-class to upload supporting files

Independent Teaching Activities

Type

Lectures

Weekly Teaching Hours

ECTS Credits

7,5

Course Outlines

🇬🇷 Greek

🇬🇧 English

External Links

Student Performance Evaluation

Assessment Language: Greek
Assessment methods:

70% final exam, 30% project presentations
or, alternatively, 100% final exam.

Learning Outcomes

The course covers the theory of asset pricing with special emphasis on the consumption-based asset pricing model. It provides a systematic overview of Consumption CAPM, ICAPM, APT and Factor models. Special emphasis is given on empirical asset pricing. The lectures are based on a set of notes and academic articles.

General Competences

Search for, analysis and synthesis of data and information, with the use of the necessary technology
Decision-making
Working in an international environment
Production of free, creative and inductive thinking

Syllabus

Introduction: Prices, returns and discount rates [notes]
Present value models [notes]

- Constant discount factors
- Valuation of bonds
- Valuation of stocks
- Data Generating Models of prices and dividends
- Gordon growth model
- Time-varying discount factors
- Log-linear approximation of returns
- Campbell-Shiller variance decompositions
- The predictive ability of the dividend-price ratio (empirical applications)

Asset pricing [C, ch. 1, notes, articles]

- Stochastic Discount Factors and basic CCAPM

Applications of the CCAPM

- Risk free rate
- Risk adjustment on asset prices
- Expected return, risk quantity and price of risk
- Variation of SDF and efficient frontier of the economy
- The equity premium puzzle
- The risk free rate puzzle

Multifactor models [C, ch. 2, 6, 9, notes]

- CAPM, ICAPM, APT

The role of information: Conditional vs unconditional models [notes, C, ch. 8, Jagannathan and Wang (1996)]
Long-run CCAPM [notes]
Empirical applications: Cross-sectional tests of CAPM, CCAPM, long-run CCAPM.

Bibliography

Lecture Notes (free access in website)
John Cochrane (2001), Asset Pricing, Princeton University Press.
Papers in academic Journals:

Campbell, J.Y. (1996): Understanding Risk and Return. Journal of Political Economy, 104, 298-345.
Campbell, J. (2000): Asset Pricing at the Millenium, The Journal of Finance vol. LV, No. 4, pp. 1515-1566.
Campbell, J.Y. and J.H. Cochrane (2000): Explaining the Poor Performance of Consumption-Based Asset Pricing Models. The Journal of Finance, LV, 2863-2878.
Cochrane, J. H. (1997): Where is the Market Going? Uncertain Facts and Novel Theories. Economic Perspectives, Federal Reserve Bank of Chicago.
Cochrane, J. H. (1999): New facts in finance. Economic Perspectives, Federal Reserve Bank of Chicago.
Cochrane, John H., (2007):Financial Markets and the Real Economy, in Rajnish Mehra, Ed. Handbook of the Equity Premium Elsevier 2007.
Cochrane, John H., (2008):“The dog that did not bark: A defense of return predictability “Review of Financial Studies 21 (4) 1533-1575.
Cochrane, John H., (2011):Discount rates, Journal of Finance 66, 1047-1108.
Lettau, M. and S. Ludvigson (2001): Understanding Trend and Cycle in Asset Values: Bulls, Bears and the Wealth Effect on Consumption. CEPR Discussion Paper No 3104.
Lettau, M. and S. Ludvigson (2001a): Measuring and Modelling Variation in the Risk-Return Trade-Off. CEPR Discussion Paper No. 3105.
Jagannathan, R. and Z. Wang (1996): The Conditional CAPM and the Cross-Section of Expected Returns. The Journal of Finance, LI, 3-53.