The course covers both theoretical and practical aspects of modern econometric models that are used by financial
institutions, investment banks, central banks, governments, think tanks, and other research institutes. The emphasis is on asset pricing and volatility modeling. The course will be accompanied by a empirical examples in Matlab. At the end of the course student is familiarized with the modern econometric techniques use in the analysis of financial data.
- Docente: EDUARDO ROSSI
Applied econometrics uses theoretical econometrics and real-world data for assessing economic theories, developing econometric models, analysing economic history, and forecasting
- Docente: JESSICA GAGETE MIRANDA
The aim of the course is to analyse asset pricing within a dynamic general equilibrium model. In particular, it adopts the stochastic discount factor approach in modelling the pricing of bonds and stocks. It also focuses on the consumption-CAPM theory and stresses its difficulties in matching the empirical evidence regarding time-series properties of risk premiums. Finally, the course introduces recent advances in modelling the link between macroeconomic variables and asset returns. If time allows, we shall discuss the evolution of stock prices in the aftermath of the Great Financial Crisis and the implications of central banks unconventional monetary policies.
Key topics
0) Basics: present values, static and dynamic optimization, risk aversion and utility function. The term structure of interest rates.
1) Capital asset pricing model (CAPM): The old view.
2) Back to fundamentals in economic analysis: financial markets as an insurance scheme.
- The role of financial markets
- The meaning of Risk sharing
3) An introduction to the consumption-based model. We apply the approach based on intertemporal consumption utility optimization to the problem of pricing single assets.
4) Empirical evidence I. The consumption-based model and the equity premium and risk-free rate puzzles
5) How can we explain the poor empirical performance of the consumption-based model?
6) Empirical evidence II. The relation between prices, dividends and returns. Are returns forecastable? Should we profit from forecastability? Market-timing issues.
7) Back to the term structure of interest rates
8) Historical episodes.
- Docente: PATRIZIO TIRELLI