Type of Credit: Elective
Credit(s)
Number of Students
The main course will focus on asset pricing and portfolio choice theories. In particular,
the course will cover the following topics:
1. Utility function and risk aversion
2. Portfolio choice problem
3. Stochastic discount factors
4. Representative agent in financial economics
5. Mean-variance portfolio optimization*
6. Factor models*
7. Asymmetric information
* Include R computer programming
能力項目說明
The one-semester course aims to introduce postgraduate level students some well-established finance theories developed by economists and important research agenda in asset pricing. After learning the course, students are expected to know basic knowledge about advanced finance theories and important research agenda, which is extremely useful for their future career in the industry or Ph.D. study related to finance.
| 教學週次Course Week | 彈性補充教學週次Flexible Supplemental Instruction Week | 彈性補充教學類別Flexible Supplemental Instruction Type |
|---|---|---|
|
Week |
Course Theme |
Content and reading assignment |
Activity and homework |
Lecture hours |
Preparation time |
|
1 |
Course introduction |
Course introduction |
- |
3 |
2 |
|
2 |
Utility and risk aversion |
Utility functions, risk aversion and certainty equivalent |
- |
3 |
2 |
|
3 |
Utility and risk aversion |
Linear risk tolerance, utility and wealth moment |
Exercise 1 |
3 |
2 |
|
4 |
Portfolio choice problem |
First order condition, single risky asset, multiple risky asset, CARA normal model |
- |
3 |
2 |
|
5 |
Portfolio choice problem |
Mean variance preference, linear risk tolerance |
Exercise 2 |
3 |
2 |
|
6 |
Stochastic discount factors |
Concept of SDFs, Arbitrage, the law of one price and existence of SDFs |
- |
3 |
2 |
|
7 |
Stochastic discount factors |
Complete market and uniqueness of the SDF, risk-neutral probabilities |
Exercise 3 |
3 |
2 |
|
8 |
Representative agent in financial economics | Consumption based CAPM, Co-skewness and co-kurtosis model Option pricing model |
- |
3 |
2 |
|
9 |
Mid-term exam week |
- |
- |
3 |
2 |
| 10 | Representative agent in financial economics | Consumption based CAPM, Co-skewness and co-kurtosis model Option pricing model |
Exercise 4 | 3 | 2 |
|
11 |
Mean-variance portfolio optimization | The calculus approach and two funds separation, Efficient frontier, Global minimum variance portfolio, Implementing mean-variance frontier analysis with R |
- |
3 |
2 |
|
12 |
Mean-variance portfolio optimization |
The calculus approach and two funds separation, Efficient frontier, Global minimum variance portfolio, Implementing mean-variance frontier analysis with R |
Exercise 5 |
3 |
2 |
|
13 |
Factor models |
CAPM, General factor models, Jensen’s alpha and performance evaluation |
- |
3 |
2 |
|
14 |
Factor models |
Statistical factors, arbitrage pricing theory, empirical performance of popular models |
Exercise 6 |
3 |
2 |
|
15 |
Asymmetric information |
No-trade theorem, normal-normal updating, fully revealing equilibria, Grossman-Stiglitz mode |
Exercise 8 |
3 |
2 |
| 16 | Final Exam week | 3 | 2 | ||
| 17 | 自主總整學習 | 自主總整學習 | 3 | ||
| 18 | 自主總整學習 | 自主總整學習 | 3 |
Exercises (50%), final exam (40%) and attendance of lectures (10%)
Websites about text books: 1.https://www.amazon.com/Portfolio-Financial-Management-Association-Synthesis/dp/0190241144/ref=sr_1_1? ie=UTF8&qid=1534654450&sr=8-1&keywords=asset+pricing+and+portfolio+choice+theory 2. https://www.amazon.com/Asset-Pricing-John-H-Cochrane/dp/0691121370/ref=sr_1_1?s=books&ie=UTF8&qid=1534654526&sr=1-1&keywords=asset+pricing 3. https://www.amazon.com/Modern-Portfolio-Theory-Investment-Analysis/dp/1118469941/ref=sr_1_1?s=books&ie=UTF8&qid=1534655030&sr=1-1&keywords=modern+portfolio+theory+and+investment+analysis 4. http://global.oup.com/us/companion.websites/9780199959327/summaries/