Asset Pricing WS 2021

General Remarks

At least in the first three weeks, the course will be offered through classroom sessions on campus as well as through videos.  We plan to record the classroom sessions and make the recordings available on Moodle. Based on the experience of the first weeks, we may change the format later.

Further information and downloads will be made available on Moodle.

Course Outline

  1. Introduction: finance basics
    Time value of money, compounding, measuring return, discount rates, dividend discount model, expected utility
  2. The stochastic discount factor
    Using the stochastic discount factor approach to understand returns on risky and risk-free assets
  3. Factor pricing models
    The CAPM and the empirical evidence, Fama-French-3-factors
  4. Aggregate stock price behavior
    Equity premium puzzle, time series predictability
  5. Rationality and Behavioral Finance
    Bubbles, Prospect Theory


  • John Cochrane: Asset Pricing, 2005, revised edition, in particular: chapters 1 (not 1.5), 9 (only 9.1), 12 (only 12.3), 20, 21 (21.1). The 1st edition will do but check out the typo list on Cochrane's homepage. The 1st chapter of the book is freely available on the website of John Cochrane.
  • Papers from the reading list, which you will find in the slides.


First lecture in the classroom: Thursday, October 21, at 2.15pm in H3.

First video upload: by Monday, October 18.

You will find all relevant information on our Moodle site.

Dates and Room

The following slots have been reserved for this course: Mondays, 4.15 - 5.45pm in H14, and Thursdays, 2.15 - 3.45pm in H3. At least in the first three weeks, however, classroom sessions will only take place on Thursdays. Material for the Monday session will be provided through videos.


The exam is of open form, which means that you do not have to take the first exam to be allowed to register for the retake.

Module description

This lecture is open for

  • Finance (MSc)
  • Wiwi (MSc)
  • WiMa (MSc)
  • WiPhy (MSc)

and others according to study plan.