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Docente
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CICIRETTI ROCCO
(programma)
The course will cover the following main areas:
1) Expected Utility Theory and Economic Theory of Choice;
2) Financial Markets and Financial Securities;
3) Efficient Portfolios and Efficient Frontier;
4) Correlation Structure of Securities and CAPM;
5) Efficient Markets and Event Study Approach.
All areas above focus on the impact of market’s returns on firm’s value as represented by its stock price. The course will give a full view on the applied financial econometrics to analyze the effect of changing in the information set can impact the daily (cumulative) abnormal return.
 REFERENCE
Elton, E. J. et Al, 2007, Modern Portfolio Theory and Investment Analysis, Wiley (Ch. 2, 3, 4, 5, 6, 7, 13, 15, 17);
INTRODUCTION (Jehle, G. et Al, 2011, Advanced Microeconomic Theory, 3rd edition, Ch. 1, 2)
• Expected Utility Theory
• The Economic Theory of Choice: An Illustration Under Certainty
• Multiple Assets and Risk
• Problem Set 0
FINANCIAL MARKETS DEFINITIONS AND FINANCIAL SECURITIES (Chapter 2, 3, 4)
• Trading Mechanics, Margin, Markets, Trade Types and Costs
• Types of Marketable Financial Securities
• The Return Characteristics of Alternative Security Types
• Problem Set 1
EFFICIENT PORTFOLIOS AND EFFICIENT FRONTIER (Chapter 5, 6)
• Combinations of Two Risky Assets Revisited: Short Sales Not Allowed
• The Shape of the Portfolio Possibilities Curve
• The Efficient Frontier with Riskless Lending and Borrowing
• Short Sales Allowed with/without Riskless Lending and Borrowing
• Riskless Lending and Borrowing With Short Sales Not Allowed
• No Short Selling and No Riskless Lending and Borrowing
• The Incorporation of Additional Constraints
• Problem Set 2
CORRELATION STRUCTURE OF SECURITY RETURNS: THE SINGLE/MULTI FACOTR MODEL (Chapter 7)
• The Inputs of Portfolio analysis
• Single Index Model : Overview and Characteristics
• Estimating Beta
• The Market Model
• Multi Factor Model (Fama-French, Carhart)
• Problem Set 3
CAPITAL ASSETS PRICING MODEL (Chapter 13, 15)
• The Assumption Underlying the Standard CAPM
• The CAPM
• Prices and the CAPM
• Empirical Tests of the CAPM and Alternative Forms of the CAPM Model
• Random Errors in Beta and Bias in the Parameters of the CAPM
• Problem Set 4
EFFICENT MARKETS HYPOTHESIS (Chapter 17)
• Some Background
• Tests of Return Predictability
• Announcement and Price Return
• Methodology on Event Studies (For full references on event study go to http://event-studies.blogspot.com/)
• Strong-Form Efficiency
• Market Rationality
• Problem Set 5
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