Asset Pricing 5 credits

Understanding what drives asset prices is fundamental to financial stability, investment strategy, and policy design. This course responds to the growing need for professionals who can interpret market valuation through theory and evidence, integrating quantitative analysis with awareness of sustainability and macroeconomic conditions that influence risk, return, and capital allocation. This course provides you with a rigorous foundation in the theory and empirical methods of asset pricing. You will explore how financial markets value securities, with a focus on the role of risk, time, and information. In the equity markets section, models such as the Capital Asset Pricing Model, are used to explain how systematic risk determines expected returns and market valuations, while insights from Behavioral Finance highlight how cognitive biases and limits to arbitrage can produce deviations from fully rational pricing. In fixed income, you will analyse the evolution of short-term rates, the shape of the yield curve, and the decomposition of yield movements into key components. For commodities and digital assets, you will be presented with frameworks addressing storage, convenience yield, and risk premia, as well as the distinctive characteristics of emerging asset classes and the role of market sentiment. The course integrates mathematical tools and empirical methods to analyse asset returns and test pricing models. Computational implementation in Python is used for econometric estimation and the analysis of financial data. Emphasis is placed on both theoretical intuition and practical application, preparing you for a career in finance, research, or further academic study. <br> **Connection to Research ** You will engage with current research in asset pricing by reading and discussing academic studies on expected returns, risk premia, factor models, and market anomalies. You will apply empirical research methods commonly used in financial economics to analyse financial data and evaluate the performance of asset-pricing models. The course also connects to research on sustainable finance, including work on green financial assets conducted at Jönköping International Business School, helping you understand how asset-pricing research informs emerging sustainability-related financial markets. <br> **Connection to Practice ** You will connect asset-pricing theory to real financial markets by analysing how risk and expected return are reflected in the valuation of individual assets across equities, fixed income, and alternative assets. Through empirical analysis of market data, you will evaluate how theoretical models perform in real market settings. Computational tools and data-analysis methods commonly used in financial markets will be applied to reflect contemporary analytical practices. <br> **Connection to Ethics, Responsibility, Sustainability (ERS)** You will examine how asset-pricing and investment decisions influence the allocation of capital and broader economic outcomes. The course addresses how risk assessment and investment strategies relate to responsible investment practices, including environmental, social, and governance (ESG) considerations. Through discussion and analysis, you will reflect on the responsibilities of financial market participants in promoting sustainable and responsible financial decision-making.