Essentials of Financial Economics

This textbook offers a comprehensive guide to key topics in financial economics, seamlessly blending theoretical insights with practical applications. It covers essential areas such as portfolio allocation, asset pricing, empirical finance, and behavioral finance, providing students with a solid conceptual foundation through a combination of theory and real-world examples.

Core topics include mean-variance portfolio theory, linear factor models for asset pricing, consumption-based asset pricing, the Black-Litterman asset allocation model, empirical cross-sectional asset pricing, and event studies. With a strong emphasis on hands-on implementation, the book integrates programming languages such as MATLAB, Python, Julia, and R, enabling students to apply financial models effectively.

The book begins with a concise and standard review of decision-making under uncertainty, gradually advancing to topics such as intertemporal consumption choices and their impact on asset prices, before concluding with empirical tools for capturing market sentiment. By bridging fundamental and advanced finance concepts, it equips students with the necessary tools to navigate the financial landscape. Theoretical models are presented with transparency, avoiding the "black box" issue by clearly explaining mathematical derivations. This structured approach enhances learning and empowers students to utilize the provided code for key financial tasks, including portfolio management, risk analysis, and market sentiment analysis.

Presents empirical studies and practical applications, thereby bridging the gap between theory and practice Analyses all the mathematical intricacies essential for students of financial economics Includes case studies from real practice to illustrate the concepts

Autorentext

Michael Donadelli is Associate Professor of Economics in the Department of Economics and Management at the University of Brescia (Italy). Before his current role, he served as an Assistant Professor of Finance at the Research Center SAFE, Goethe University Frankfurt (Germany), and as Assistant Professor of Economics at Ca' Foscari University (Italy). His research spans various areas, including macro-finance, international finance, behavioral finance, and climate change economics. Before embarking on his academic journey, he gained valuable experience in the financial industry as an analyst and consultant.

Michele Costola is Associate Professor of Economics in the Department of Economics at Ca' Foscari University of Venice (Italy). Previously, he held positions as a Post-Doctoral Research Fellow at Goethe University Frankfurt (Germany) and Ca' Foscari University. Michele's research interests lie at the intersection of econometrics, financial economics, macroeconomics, environmental economics, and asset allocation.

Ivan Gufler is a Post-Doctoral Researcher in the Department of Economics and Finance at Luiss Guido Carli Rome (Italy). Ivan enriched his academic journey as a visiting Ph.D. student in the Department of Finance at Stockholm School of Economics (Sweden) and in the Department of Finance at HEC Paris (France) and previously served as a research assistant at the Venice Centre in Economic and Risk Analytics for Public Policies (VERA). His research interests lie in the fields of financial economics, empirical finance, and macro-finance.

Inhalt

Choice under Uncertainty.- Modern Portfolio Theory.- The Capital Asset Pricing Model.- Empirical Analysis of the CAPM.- The Consumption CAPM.- Arbitrage Pricing Theory and Multi-factor Models.- Empirical Cross-Sectional Asset Pricing.- The Black-Litterman Model.- Event-Study Analysis.