This course is intended for PhD students in finance and related fields. It is designed to teach
students how to conduct empirical research in asset pricing. The goal is that students become
familiar with the issues at stake in empirical asset pricing, the methodologies used, the
classic papers as well as the recent
contributions, and be able to analyze and evaluate new research effectively. Finally, students are expected
to acquire the skills to conduct and present original empirical research in finance.
Material from two texbooks will be used thoughout the course:
[CLM} John Y. Campbell, Andrew W. Lo and A. Craig MacKinlay, The Econometrics of Financial Markets, Princeton University Press, 1997.
[AP} John Cochrane, Asset Pricing,
Princeton University
Press, 2001.
[S] Kenneth J. Singleton, Empirical Dynamic Asset Pricing: Model
Specification and Econometric Assessment, Princeton
University Press, 2006.
In addition to the textbooks we will also assign journal articles
(most downloadable from JSTOR and/or UNC e-journal links).
Prerequisites are: Econ 770, 771 and Busi 880. This means students must have basic knowledge of
financial economics and econometrics at the level of first year PhD courses. Knowledge of the material in Econ
871 (Time Series) is beneficial.
Campbell, J., and R. Shiller, 1988, The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors, Review of Financial Studies 1, 195-228. Campbell, J., and R. Shiller, 1987, Cointegration and Tests
of Present Value Models, Journal of Political Economy 95, 1062-1087.
Students taking the course for credit
will be required to write reports and present papers, accounting for 60% of the grade
and take the final exam counting for the remaining 40%.
This is a very demanding course, irrespective of whether you are registered or just auditing.
The average student can expect to spend at least 20 hours per week outside of class with
assigned readings, reviewing lectures, etc.
The following papers will be covered in addition to the textbook material
Cochrane John, "Explaining the Variance of Price-Dividend Ratios". Review of Financial
Studies 5:2, (June 1992) 243-280.
Hodrick, R., 1992, Dividend Yields and Expected Stock Returns: Alternative Procedures for
Inference and Measurement, Review of Financial Studies 5, 357- 386.
Stambaugh, Robert F., 1999, \Predictive Regressions", Journal of Financial Economics, 54,
375{421.
Ang A. and Bekaert G. \Is Predictability there?", working paper, GSB, Columbia University.Fama, E., and K. French, 1988a, Permanent and Temporary Components of Stock Prices,
Journal of Political Economy, 96, 246-273.
Lustig Hanno and Stijn Van Nieuwerburgh. The Returns on Human Capital: Good Newson Wall Street is Bad News on Main Street. Working Paper, NYU and UCLA.
Lettau, M, and S. Ludvigson, 2001, Consumption, Aggregate Wealth, and Expected StockReturns, Journal of Finance 56, 815 - 850.
Lewellen, Jonathan W., 2004, Predicting Returns with Financial Ratios, Journal of Financial
Economics, 74 (2), 209-235.
Bollerslev, T., 1986, Generalized Autoregressive Conditional Heteroscedasticity, Journal of
Econometrics 31, 307-327.
Bollerslev, T., R. Chou, and K. Kroner, 1992, ARCH Modeling in Finance: A Review of the
Theory and Empirical Evidence, Journal of Econometrics 52, 5-59.
Engle, R., 1982, Autoregressive Conditional Heteroskedasticity with Estimates of the Variance
of U.K. In0ation, Econometrica 50, 987-1008.
Engle, R., V. Ng, and M. Rothschild, 1990, Asset Pricing with a Factor- ARCH Covariance
Structure: Empirical Estimates for Treasury Bills, Journal of Econometrics 45, 213-237.
Nelson, D., 1991, Conditional Heteroskedasticity in Asset Returns: A New Approach,
Econometrica 59, 347-370.
Schwert, G.W., 1989, Why Does Stock Market Volatility Change Over Time?, Journal of
Finance 44, 1115-1153.
Bollerslev, T., R. Engle, and J. Wooldridge, 1988, A Capital Asset Pricing Model with Time
Varying Covariance, Journal of Political Economy 96,116-131.
French, K., W. Schwert and R. Stambaugh, 1987, Expected Stock Returns and Volatility,
Journal of Financial Economics 19, 3-30.
Whitelaw, R., 1994, Time Variations and Covariations in the Expectation and Volatility of
Stock Market Returns, Journal of Finance 49, 515-541.
Campbell J. and Hentchell L. 1992, No News is Good News: A Asymmetric changingVolatility in Stock Returns, Journal of Financial Economics 31, 281-318.
Harvey, C., 1989, Time Varying Conditional Covariance in Tests of Asset Pricing Models,
Journal of Financial Economics 24, 289-317.
Jagannathan, R., and Z.Wang, 1996, The Conditional CAPM and the Cross-Section ofExpected Returns, Journal of Finance 51, 3-53.
