Registry

Module Specifications

Archived Version 2020 - 2021

Module Title
Module Code
School
Online Module Resources
NFQ level	9	Credit Rating	7.5
Pre-requisite	None
Co-requisite	None
Compatibles	None
Incompatibles	None

Description

The aim of this course is to provide students with a thorough foundation in the principles of the theory of financial asset pricing. It will consider perspectives from the academic literature as well as from professional practice. It will analyse and critique various classes of asset pricing models and theory. It will start with utility theory , risk-return characteristics of different assets and their relationship with different risk measure. Students will develop an appreciation of asset pricing and portfolio diversification leading to the development of the Capital Asset Pricing Model and associated models, as well as Arbitrage Pricing Theory, Fama-French 3 and 5- factor models, and Behavioural Finance. This module is delivered through a combination of weekly lectures and tutorials. Students are expected to attend lectures, to contribute to tutorials and to engage in on-line learning and research activities on a regular basis. In tutorials students will discuss solutions to problem sets and as well as expert articles. Students may also be required to work on a collaborative basis in groups for example in the case of continuous assessment.

Learning Outcomes

1. Describe and apply fundamental principles and concepts in finance
2. Appraise the relationship between risk and return
3. Critically assess the literature of financial theory
4. Explain and critique the principal theories of asset pricing

*Type*	*Hours*	*Description*
Workload	Full-time hours per semester
Lecture	36	Formal Lectures & Interactive Classroom
Independent Study	45	Directed readings & problem sets
Directed learning	71.5	Independent study - Exam Preparation
Directed learning	35	Continuous Assessment Assignment preparation
Total Workload: 187.5

All module information is indicative and subject to change. For further information,students are advised to refer to the University's Marks and Standards and Programme Specific Regulations at: http://www.dcu.ie/registry/examinations/index.shtml

Indicative Content and Learning Activities

Introduction to Asset Pricing
Introduction to asset pricing, behaviour and characteristics of asset prices. Discrete-time stochastic processes. Random Walk, Martingale, Technical Analysis and Present Value models. The discount rate and other measures, risk-free rate , complete and incomplete markets. Efficient markets hypothesis (EMH).

Mean - Variance Uncertainty
Mean -Variance theory of portfolio selection. Risk-free asset, Markowitz frontier, indifference curves. Utility functions, quadratic-linear representations and diminishing marginal utility.

Utility Theory
Utility Theory. expected utility, risk aversion. Risk aversion and the risk premium. HRRA, CRRA and Power Utility Function.

Asset Pricing Models
Asset Pricing Models, CAPM, Consumption CAPM, ICAPM, Fama-French 3 -factor, Carhart 4-factor, Fama-French 5-factor. Arbitrage Pricing Theory (APT). Production-based and Income-based asset pricing.

Asset Prices and disequilibrium in financial markets.
Speculation and disequilibrium in financial markets. Behavioural Finance - overview and empirical review

Assessment Breakdown
Continuous Assessment	%	Examination Weight	%

Type	Description	% of total	Assessment Date
Course Work Breakdown

Reassessment Requirement
Resit arrangements are explained by the following categories; 1 = A resit is available for all components of the module 2 = No resit is available for 100% continuous assessment module 3 = No resit is available for the continuous assessment component
Unavailable

Indicative Reading List

Cochrane: 2009, Asset Pricing, 3, 1-5, Princeton,
Hull: 2011, Options, Futures and other Derivatives, 7,
Duffie: 2001, Dynamic Asset Pricing, 2, Princeton,

Other Resources

None

Programme or List of Programmes

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