MFE 06: Financial Markets
(MFE 06)

Scope :

First, we discuss empirical tests of market efficiency, analyzing the predictability of asset returns. The degree of market efficiency is investigated in the event studies measuring the stock price response to such economic events as share repurchase or dividend announcement. Then, we study the possible applications and validity of the CAPM and multi-factor asset pricing models, with particular attention to the return anomalies (e.g., size and book-to-market effects) and the equity premium puzzle. Finally, we discuss how to evaluate portfolio performance, using the example of mutual funds. In particular, we analyze performance persistence, dynamic strategies, and impact of the survivorship bias.