|The central question of empirical finance is "what are the real sources of aggregate risk that determine asset prices?" This course focuses on current topics in empirical finance that address this question.
This course begins with a review and synthesis of asset pricing and macroeconomic theory. The emphasis is on the stochastic discount factor framework for thinking about asset pricing, and the course spends some time exploring this framework and relating it to traditional expected return-beta statements of asset pricing models. The class discusses some econometric issues in assessing asset pricing models, including the relationship between GMM and traditional tests. Finally, the course surveys current empirical work in consumption-based models, investment or production based models, volatility tests and predictability, and the effects of individual heterogeneity and frictions in asset markets.