Opções de inscrição
This graduate course in Financial Economics I will cover
theory and data. The course will focus on asset pricing literature in discrete
time. It develops around 3 key ideas: (i) the relationship between consumption
and returns (or macroeconomics and finance), (ii) properties in the time-series
of aggregate returns (predictability of returns, efficient market hypothesis), (iii)
properties in the cross-section of returns (why do different assets pay on
average different returns?). Consumer-based asset pricing models will be
studied. The empirical puzzles of the canonical model of this family (Lucas
1978, Mehra and Prescott 1985) justify more than 25 years of economic
literature. We will go through this literature analyzing its relevant
theoretical and empirical aspects. The predictability of aggregate returns will
then be studied. This issue is related to the puzzles seen earlier, and
predictability is a necessary ingredient for any model that seeks to explain
such puzzles. It will be empirically investigated whether future returns are
predictable, and whether the predictability of returns opposes the
theoretical idea of efficient markets. Next, the literature is studied about
the properties in the cross-section of recurrences. First, there will be
several CAPM failures leading us to multifactorial models. These models have
been proposed to explain why different assets pay different returns.
Different models will be compared as to their ability to explain returns. To understand the literature in Financial Economics, it is crucial to understand
how the theoretical models fail to fit the data. Some articles will be required
as supplementary reading. Thus, at the end of the course, the student will be
equipped to research asset pricing. In this position, the student should
be able to propose a thesis problem, and visualize the solution to
the common problems that arise in financial markets, for example, active and
passive portfolio allocations, immunization of portfolios, and measurement of
market risk, among others. Homework will be a crucial part of the course and include theoretical and empirical exercises.
- Docente: Ricardo Dias de Oliveira Brito
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