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Updated A.Y. 2022-2023

Updated version: February 2023

for PDF final detailed version go to Teaching material

The course will cover the following main areas: Theory of Choice and Expected Utility, Financial Markets and Securities, Efficient Portfolios and Frontier, Single Index Model, Standard and Non-Standard Capital Assets Pricing Model, Multifactor Models, Empirical Test of Equilibrium Models, Efficient Markets Hypothesis.

Course’s objectives and expected learnings:

  • LEARNING OUTCOMES: Theoretical knowledge of financial assets and financial markets.  
  • KNOWLEDGE AND UNDERSTANDING: Evaluation of financial assets available in the markets.
  • APPLYING KNOWLEDGE AND UNDERSTANDING: Analytical skill to model implementation and coding.
  • MAKING JUDGEMENTS: Ability to analyze data and parameters to interpret results from estimated model.  
  • COMMUNICATION SKILLS: Clear approach to verbal and written statement related to results and conclusion of the analysis.
  • LEARNING SKILLS: Ability to analyze solutions from theoretical models with critical approach.

Main References:
Elton, E. J. et al., Modern Portfolio Theory and Investment Analysis, Wiley, 2007  -- Chapter 2, 3, 4, 5, 6, 7, 9, 13, 14, 15, 17

Section 1: Market and Securities’ Characteristics

  • Markets and Indexes Definitions;
  • Prices and Returns of Securities;
  • Prices and Returns of a Portfolio;
  • Practice 1: Compute the Stocks and Portfolio’s Return/Risk Prospects.


Section 2: Efficient Portfolios and Efficient Frontier

  • Building the Efficient Frontier;
  • Shape of the Efficient Frontier;
  • Extend the Efficient Frontier allowing for Risk Free Rate and Short Selling;
  • Return Maximization Problem;
  • Practice 2: Building the Efficient Frontier.


Section 3: Single Index Model

  • Inputs for the Portfolio Analysis;
  • Single Index Model: Overview and Characteristics;
  • Estimating Stocks and Portfolios’ Market Betas;
  • Building the Frontier with the Single Index Model;
  • Practice 3: Estimating the CAPM and the FFC Single Stock Level and for a Portfolio.


Section 4 and 5: Standard and Non-Standard Capital Assets Pricing Model

  • Capital Asset Pricing Model by means an Intuitive Approach;
  • Capital Asset Pricing Model by means a Rigorous Approach;
  • Fama-French e Carhart Multifactor Model (FFC);
  • CSR Risk-Factors and the Investors’ Preferences for Responsible Investment;
  • Corporate Social Responsibility, Responsible Investments on the Financial Markets;
  • Responsible Fama-French-Carhart Model (RFFC);
  • Standard Test for Equilibrium Models;
  • Black, Jensen e Sholes Approach;
  • Fama MacBeth Approach;
  • Practice 4 and Practice 5: Estimating the Factors’ Risk-Premia by using the Fama-MacBeth Approach.


Section 6: Efficient Markets Hypothesis

  • Introduction to the Efficient Market Hypothesis (EMH);
  • Three forms of Market Efficiency;
  • Semi-Strong Market Efficiency and the Event Study Approach;
  • Tests for the Semi-Strong Market Efficiency;
  • Practice 6: Estimating the (C)AR by using the Event Study Approach.