University of Michigan
School of Business Administration

Course Syllabus
Business Administration 855

Instructors:

Sugato Bhattacharyya
Office: D6206
Phone: 763-9777
E-Mail: sugato@umich.edu

Tyler Shumway
Office: D6209
Phone: 763-4129
E-Mail: shumway@umich.edu
Home Page: http:\\www-personal.umich.edu\~shumway

Course Objective:

BA855 is designed to provide incoming Ph.D. students with a broad overview of Finance as an academic discipline. The course will survey a number of topics in financial economics, particulary asset pricing and corporate finance. It will cover some of the basic theories as well as some of the empirical evidence related to each topic. The course will primarily be taught by two instructors, but faculty members other than the primary instructors will occasionally lecture on topics within their field of expertise. Since the purpose of this course is to give students a coherent view of the entire discipline, the emphasis of the lectures will be on interconnections between the various topics that make up financial economics.

This syllabus only includes material from my half of the course. Sugato will give you more information about his half in October or November.

Course Material:

Course materials will include a number of academic papers, chapters from several different textbooks, and some course notes. Useful reference books include:

Campbell, John, Andrew Lo, and A. Craig MacKinlay, 1997, The Econometrics of Financial Markets, Princeton University Press, Princeton, New Jersey.

Duffie, Darrell, 1992, Dynamic asset pricing theory, Princeton University Press, Princeton, New Jersey.

Huang, Chi-fu, and Robert H. Litzenberger, 1988, Foundations for Financial Economics, North-Holland, New York.

Ingersoll, Jonathan E., 1987, Theory of Financial Decision Making, Rowman & Littlefield, Savage, Maryland.

Varian, Hal. R., 1992, Microeconomic Analysis, third edition, W. W. Norton & Company, New York.

Grading:

There will be both a final exam and weekly homework assignments to complete. The final exam will count for 75% of your grade and the homework assignments will count for the remaining 25%. The final will probably be a timed take-home exam.

Course Outline:

The course outline is not a weekly schedule. Some of the topics will take more than one session to cover and other topics will take less time. Most topics are accompanied by reading assignments listed below.

  1. Introduction
  2. S. Ross, "Finance," in The New Palgrave Dictionary of Money and Finance, 1992.

  3. The capital asset pricing model (CAPM)
  4. Ingersoll, chapter 4

  5. General properties of asset pricing models
  6. Campbell, Lo, and MacKinlay, chapter 8

  7. The fundamental theorem of asset pricing
  8. P. Dybvig and S. Ross, "Arbitrage," in The New Palgrave Dictionary of Money and Finance, 1992.

    Duffie, chapter 1

  9. The arbitrage pricing theory (APT)
  10. Ingersoll, chapter 7

  11. Expected utility theory
  12. Varian, chapter 11

  13. Representative agent theorems
  14. Huang and Litzenberger, chapter 5

  15. Dynamic programming
  16. Kreps, D., 1990, A Course in Microeconomic Theory, appendix 2.

  17. Consumption-based models
  18. R. Lucas, "Asset Prices in an Exchange Economy," Econometrica 46, 1429-1445, 1978.

  19. Introduction to Continuous-Time Asset Pricing
  20. Conclusion