empfohlenes Vorwissen

Students are assumed to have an undergraduate level knowledge of finance (for instance by having taken an introductory course in investments or asset pricing). Basic econometric skills are helpful to understand empirical research conducted in the research papers, which the course’s content is based on. Programming experience (in particular in Python) can be useful (see the Abstract below for details). A sufficient level of spoken and written English language skills is necessary.

Abstract

The lecture, which takes place twice a week in the first half of the semester, gives an introduction to the field of equity market anomalies. It provides an overview over well-known as well as and recently discovered cross-sectional quantitative anomalies and discusses from both a theoretical and an empirical point of view why these return patterns might arise and persist. It also discusses to which extent these anomalies may be translated into effective investment strategies, and explains potential pitfalls when evaluating trading strategies.

In the second half of the semester, students make use of their newly acquired knowledge by writing and presenting a seminar paper in which they critically evaluate specific trading strategies/market anomalies. Students can decide whether their paper is based mainly on a synthesis of the literature or based mainly on programming, backtesting, and critically discussing a self-proposed trading strategy (for instance via the online platform “Quantopian”).

Lehrinhalte

Content of the lecture

• Introduction and “big picture”
• Conceptual foundations, behavioral finance, and limits to arbitrage
• The classical anomalies: Size, value, momentum
• The “high risk, low return” anomalies
• The post-earnings announcement drift and other event-based anomalies
• Violations of the law of one price and information spillover effects (e.g. pairs trading)
• The impact of sentiment
• The role of media for stock market anomalies
• Meta anomalies and other current trends in the literature

Literaturangaben

As the course discusses recent research, there is no specific textbook that covers all aspects of the course. Useful survey papers are:

• Zacks (2011), “The handbook of equity market anomalies”, Wiley Finance.
• Barberis/Thaler (2003), “A Survey of Behavioral Finance”, in: Handbook of the Economics of Finance, Chap. 18, 1054-1123.
• Subrahmanyam (2010), “The cross-section of expected stock returns: What have we learnt from the past twenty-five years of research?”, European Financial Management, 16, 27–42.

didaktisches Konzept

Presentation, discussion, paper writing

Die Veranstaltung entspricht einem Vorlesungsanteil von 2 SWS und einem Seminaranteil von 2 SWS.