MSc Finance

This course introduces mainstream asset-pricing models used to explain the behaviour of asset prices and returns. It addresses three central questions: (1) why do stocks earn different returns? (2) how are risk premia linked to macroeconomic conditions? and (3) can a single unifying framework capture asset valuation? Students progress from the foundational Capital Asset Pricing Model (CAPM) to multi-factor approaches—from the classic Fama-French three-factor model to the latest factor innovations—before exploring how general equilibrium frameworks, via the stochastic discount factor, tie asset prices to the broader economy. The unit concludes with an overview of fixed-income instruments, giving students a comprehensive perspective on pricing across classical asset classes 

BMAN71111 Programme Req: BMAN71111 is only available as a core unit to students on MSc Accounting & Finance and MSc Finance

The course unit aims to introduce basic concepts and mainstream thoughts of popular asset pricing models. The course unit also aims to strengthen students’ understanding in the way that asset pricing models are constructed and in related empirical evidence.

Knowledge and understanding
KU1 Explain the basic theoretical foundations of mainstream asset‑pricing models.
KU2 Analyse theoretical and empirical issues at the forefront of asset‑pricing research and practice.
KU3 Evaluate alternative viewpoints on asset‑pricing issues.

Intellectual skills
IS1 Critically compare different asset‑pricing models based on their theoretical assumptions and empirical performance.
IS2 Synthesise knowledge of asset‑pricing models with contemporary research to propose novel approaches or insights.
IS3 Formulate testable hypotheses about asset‑pricing phenomena and design empirical strategies to evaluate them.

Practical skills
PS1 Implement asset‑pricing models on real‑world financial data to analyse market behaviour.
PS2 Estimate multi‑factor models and interpret their outputs using statistical software.
PS3 Retrieve, clean, and visualise financial datasets relevant to asset‑pricing analysis.

Transferable skills and personal qualities
TS1 Articulate complex financial concepts clearly and effectively to both specialised and non‑specialised audiences.
TS2 Exhibit advanced problem‑solving and decision‑making skills in uncertain and dynamic environments.
TS3 Collaborate effectively in teams to deliver data‑driven investment evaluations and presentations.

Section I: Discounted Dividend Model
Section II: Capital Asset Pricing Model
Section III: Efficient Market Hypothesis and Anomalies
Section IV: Arbitrage Pricing Theory
Section V: State Prices and Consumption-CAPM
Section VI: Fixed-Income Securities 

Lectures 30 hours
Independent study: 120 hours

Written examination (100%) 

Students have the opportunity to meet the teaching staff during their office hours. They could also arrange separate meetings with the teaching staff outside their office hours. In each week of the teaching semester, practice questions are available for students to prepare for the assessment.

 

1. Elton, E. J., Gruber, M. J., Brown, S. J., & Goetzmann, W. N. (2009). Modern portfolio theory and investment analysis. John Wiley & Sons.
2. Cochrane, J. H. (2009). Asset pricing: Revised edition. Princeton university press.
3. Bodie, Z., Kane, A., & Marcus, A. J. (2013). Investments. McGraw-Hill.

Informal Contact Methods

Office Hours