Ruy M. Ribeiro

Teaching

Empirical Asset Pricing

Doctoral course

PhDInsperTaught in English

A doctoral course organized entirely around the stochastic discount factor: theory is taken as given and confronted with data. Three clusters of questions: the level of prices and the equity premium, the cross-section of expected returns, and time variation in expected returns. The same SDF machinery is then applied across bonds, currencies, options, and commodities. Students present papers from a curated list.

Topics

  • Stylized facts and the equity premium
  • Linear factor models and their econometrics: time-series and cross-sectional tests, Fama-MacBeth, GMM
  • Conditional models and the Lewellen-Nagel-Shanken critique
  • Return predictability and present-value logic
  • Continuous-time methods; options and no-arbitrage valuation
  • Bonds and affine term-structure models
  • Currencies and commodities through the SDF lens
  • Paper presentations from a curated reading list

Audience

PhD students; assumes a first-year asset pricing theory course (Cochrane ch. 1-9 or Campbell ch. 1-7).

Materials

Nine lecture-note blocks, a 15-chapter companion book, a data manual, problem sets with code, and a paper-presentation program.

The course is a continuation of a first-year asset pricing theory sequence: theory is taken as given, and the work is confronting it with data. A companion book extends the lecture notes into credit, real estate, production-based, intermediary, and demand-system asset pricing, and a data manual plus problem sets with code make the empirical work reproducible.

Book Preface and Table of Contents Show

Empirical Asset Pricing: A Graduate Course in Risk, Return, and Prices — the companion book, from the stochastic discount factor to continuous-time pricing.

From the preface. This book grew out of the lecture notes for the graduate course in empirical asset pricing that I teach at Insper. Its aim is narrow but, I hope, useful: to take a small number of central ideas in modern asset pricing and develop them carefully, from the economic motivation through the formal model to the econometric tests that confront the model with data.

The organizing principle throughout is the stochastic discount factor. A single pricing equation, pt = Et[Mt+1 xt+1], underlies everything that follows: the factor models, the present-value logic of predictability, continuous-time pricing, and the no-arbitrage valuation of options. Seeing the same equation reappear in these different guises is the main pedagogical payoff of organizing the material this way.

A word on prerequisites: the reader has seen the unconditional CAPM and the Fama-French factor models, is comfortable with time-series econometrics at the level of ARMA models, and has a working knowledge of probability. The exposition leans heavily on Cochrane's Asset Pricing and on the original articles cited throughout; the reader is strongly encouraged to read those sources alongside these chapters.

Contents

  1. Introduction
  2. Linear Factor Models
  3. Conditional Factor Models and Biases in Tests
  4. Return Predictability
  5. Continuous-Time Finance
  6. Options
  7. The Term Structure of Interest Rates
  8. Currencies and the Carry Trade
  9. Commodity Futures
  10. Corporate Bonds and Credit
  11. Real Estate and Mortgage-Backed Securities
  12. Production-Based Asset Pricing
  13. Intermediary Asset Pricing
  14. Demand-System Asset Pricing
  15. Asset Management: Mutual Funds and Hedge Funds

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