5008084: Empirical and Experimental Methods in Finance

Description

• This lecture is divided into empirical and experimental methods. The empirical methods will cover:Foundations of Modern Standard Capital Market TheoryCapital Asset Pricing ModelInformation Efficiency Hypothesis - Typical Market AnomaliesThe Event Study MethodIntroduction and BackgroundEvent Studies in the Short TermEvent-Studies in the Long Term - Empirical Asset Pricing TestsTime-series testsCross-sectional tests - The experimental methods will cover:Key concepts of experimental methodsIntroduction to the conceptual framework of experimental financeKey decision mindsets of market participantsIntroduction to trading anomaliesSpeculative BubblesTrading behaviour of the 'over the counter' (OTC) marketAlternative applications of experimental methods in finance

Learning Outcomes

• Students...understand the concept of capital market efficiency and its implications for capital market theoryare able to list and identify market anomalies by means of empirical dataunderstand crucial steps in event-study methodology and possible fields of its applicationare able to apply event-studies for own empirical investigationscan distinguish between time-series and cross-sectional tests of the CAPMapply empirical asset pricing tests to time-series, cross-sections and panel dataare able to understand how buyers and sellers set a market priceknow the fundamental rules of experimental methods in financecan determine how information is reflected in the market price and evaluatedparticipate in experiments and create their own experiment to understand the logical structure behind this approach.

Lectures Method

Interactive lecture with exercises

Literature

• Required reading for Empirical Methods:Campbell, J. Y., Lo, A. W., & MacKinlay, A. C. (1997). The econometrics of financial markets Princeton: Princeton University Press.Cochrane, J. H. (2005). Asset pricing, Princeton: Princeton University Press. - Required reading for Experimental Methods:Current academic papers will be used in the course. They will be announced at the beginning of the term.