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CM U121 - Global Stock Markets*, Q3 *CLOSED FOR FURTHER ENROLMENT*

Faculty
Ole Risager, Professor
Course Coordinator
Ole Risager, Professor
Prerequisite/progression of the course
Bachelor level in finance and macroeconomics
Course content, structure and teaching
Participants will obtain insights into global stock markets. More specifically, we look at historic returns and risks across major markets. We discuss time series properties of stock markets, including mean reversion and random walk behaviour. The course also presents different stock market plays, including value and growth strategies. Finally, the course presents a number of insights in Behavioral Finance, including overconfidence, limited arbitrage, myopia, and deviations from market efficiency.
The course will be taught in lecture format with expected student participation, including class presentations of current market trends in the US, Germany, and Denmark. You are expected to read the material in advance and be prepared for class discussions. Lectures will be fairly non-mathematical. We will on a regular basis discuss market developments. The course should provide inspiration for thesis work.
The course's development of personal competences
The overall goals of the course are to improve students’ fundamental understanding of stock markets and to make students familiar with behavioural finance, which combines insights from market experience, psychology and traditional economics.
At the end of the course participants should:
  • Be familiar with some of the most important stylized facts in finance
  • Be able to think about these facts using different theoretical models and insights
  • Be familiar with some of the new insights in behavioral finance
  • Be familiar with strategies that aim at beating the market and also know the exceptions to these rules including some of the past failures
  • Be more familiar with world equity markets including current issues and trends
Learning Objectives
In order to achieve the highest possible grade – 12 – the student should be able to:
  • Explain the key issues addressed in the course (Limited arbitrage. Loss aversion. The equity premium and the problems for established theory in explaining the high premium. Over confidence and investor irrationalities. Active trading strategies and their limitations. Global financial crisis issues, etc.).
  • Apply the theories on practice. The goal is to demonstrate how to use the literature on issue that are currently important.
  • Derive mathematically the key formulas that we have worked on in the class room. A top performer will be able to go behind the curtain and demonstrate how the key propositions are derived. The key formulas will be carefully listed in the lecture notes.
Type of examination, exam aids and assessment
4-hour individual written exam (closed book). No aids are allowed. Assessment according to the Danish 7-point scale.
Recommended literature
  • Risager O., 2009, Investing in Value Stocks, McGraw-Hill
  • Barberis N. and R. Thaler, 2002, A Survey of Behavioral Finance, pp. 1-15; 30-35. NBER Working Paper 9222.
  • JPMorgan, Global Data Watch, pp. 1-3, pp. 9-11, pp. 23-24, January 11, 2008.
  • M. Barnes, J.H. Boyd and B.D. Smith, 1999, Inflation and Asset Returns, European Economic Review, 43, pp. 737-754.
  • Campbell, J.Y., Lo, A.W. and MacKinlay A.C., 1997, The Econometrics of Financial Markets, pp. 27-33, pp. 44-47, pp. 66-68. Princeton University Press.
  • Chan L.K.C., J. Karceski and J. Lakonishok, 2000, New Paradigm or Same Old Hype in Equity Investing?, Financial Analyst’s Journal, Vol. 56, No. 4, pp. 23-36.
  • Dimson E., P. Marsh and M. Staunton: Risk and Return in the 20th and 21st Centuries, Business Strategy Review, 2000, Vol. 11, pp. 1-18.
  • Geanakoplos J., M. Magill, and Martine Quinzli, 2004, Demography and the long run predictability of the stock market, pp. 241-247 and pp. 288-302, Brookings Paper.
  • Kocherlakota N. R., 1996, The Equity Premium: It’s Still a Puzzle, Journal of Economic Literature, Vol. XXXIV, pp. 42-71.
  • Lakonishok, J., A. Shleifer and R.W. Vishny, 1994, Contrarian Investment, Extrapolation, and Risk, Journal of Finance, Vol. 49, 5, pp. 1541-78
  • Nielsen S. and O. Risager, Stock Returns and Bond Yields in Denmark, Scandinavian Economic History Review, 2001.
  • Risager, O., 2010, Lecture Notes U81, 2010.
  • Rutterford, J., 1993, Chapter 5: Ordinary shares, in Introduction to Stock Exchange Investment, Second Edition, MacMillan.
  • Samuelson, P.A., 1991, Long-Run Risk Tolerance When Equity Returns Are Mean Regressing: Pseudoparadoxes and Vindication of “Businessmen’s Risk” in W.C. Brainard, W.D. Nordhaus, and H.W. Watts, eds., Money, Macroeconomics and Economic Policy, pp. 181-193, MIT Press.
  • Siegel J.J. and Thaler, R.H., 1997, Anomalies, The Equity Premium Puzzle, Journal of Economic Perspectives, Volume 11, Number 1, pp. 191-200.

Last updated by The electives Office 31/01/2010