ECON3016 Empirical Finance
Specifically the module aims to provide a bridge to the more theoretical articles in finance theory, by offering a simple framework of conceptual knowledge that enables thinking while making financial decisions. As such the module gives an appreciation of the scope of the whole disciplines' subject matter and lays the foundations for more specialized courses that have a narrower focus.
Aims and Objectives
The module confronts economic theories (eg efficient markets, CAPM) about stock prices and returns with real world financial data. The first part of the module deals with how prices and returns should behave in an efficient market and introduces statistical techniques to assess whether such behaviour is supported by the data. The second part of the module looks at departures from the efficient markets framework by introducing various popular investment strategies used by fund management companies as well as techniques used to assess whether it is possible to beat the market by following such strategies. At the end of the module, students should also become well versed in the overall characteristics of equity markets and modern fund management practices.
Having successfully completed this module you will be able to:
- Stock prices and returns behave and whether they are forecastable
- Construct simple models to assess whether a stock price is over or undervalued
- Demonstrate knowledge and understanding of the tradeoffs between stock market risk and return and explore various ways of quantifying risk
- Conduct event studies for assessing the impact of events on stock prices
- Simulate popular investment strategies and assess whether you can make money out of them
The module provides a comprehensive introduction to the theory associated with equilibrium asset pricing models.
Learning and Teaching
|Total study time||150|
The course grade is determined based on a student’s performance in the two-hour final examination and 4 graded homework assignments. 80% of the final grade will be the final exam whereas the 4 homework assignments will carry a weight of 5% each. The class size is prohibitive (around 250 students) to grade each of the assignments individually and return it back in a timely fashion. Therefore, the assignments are group-based and comprise of multiple choice questions and short-essay questions that are similar to the questions in the assignments.
|Coursework (2 hours)||10%|
Repeat type: Internal & External
Prerequisites: ECON1007 and ECON1008 (or ECON1005) and ECON1006 and ECON1008