Advanced Empirical Asset Pricing

In this course we will discuss the fundamentals of Asset Pricing and how to test them. Although this is an Empirical Asset Pricing course, we deal with some concepts from Asset Pricing Theory that we can test afterwards (CAPM, ICAPM, CCAPM, recursive utility). Besides, the course will cover the most important empirical methods to do so. For that purpose, we will discuss the overarching tool Generalized Method of Moments, and the special cases of OLS and FMB regressions. Every second week, we will meet for a programing session, in which we will look at the data to draw our own conclusions. An introduction to the software MATLAB will be given at the beginning of the course. Students should bring a laptop to these sessions. Programing skills are not required but helpful.

We start with a review of the Stochastic Discount Factor, which is already known from the course „Asset Pricing“. We then derive the CAPM and the Consumption-CAPM as special cases from the general consumption-savings optimization problem of the rational investor. In the first part of the course we discuss the CAPM and, as natural extensions, models with multiple factors. Prominent phenomena such as the value premium and momentum are discussed. In the second part of the lecture we will study extensions of the Consumption-CAPM and study the implications of exotic preferences.

The course will not take place in the upcoming winter semester (WS 2024/2025).