This course aims to bridge the gap between theoretical financial models and the real world by taking us through the major accomplishments (and failures) of empirical macro finance during the last quarter of a century. The topics covered include the efficient market hypothesis, theories of determination of returns and stock prices, concepts of behavioural finance, the term structure of interest rates and exchange rates.
The lectures will present theories in finance and empirical approaches to test the theories. After most lectures, students will be assigned problem sets that are designed to practice with real data and to apply the econometric techniques that are discussed in the lectures. Students will therefore learn how to interpret the data through the lenses of financial theories and how to test for it.
Prerequisites: ECOM050 Investment Management