CORPFIN 7024 - Capital Markets Analysis (M)

North Terrace Campus - Semester 1 - 2018

This course is split into two. The first section provides a brief overview of asset pricing theory by deriving common general equilibrium and no arbitrage models used for pricing assets before focusing on the empirical, testable implications that result from them. Emphasis will be placed on examining items from a market efficiency perspective, covering long-standing debates on asset price predictability and in formativeness. Asset pricing at the market microstructure level will also be introduced. The second section provides a foundation for creative and empirical research in corporate finance. The objective is to introduce students to contemporary issues in corporate finance, identify the main theoretical tools and empirical approaches, and critically evaluate research in corporate finance. Students would be encouraged to think more broadly across different areas in corporate finance, and the strand of literature that bridges the corporate finance and asset pricing divide.

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Course Details

Course Code	CORPFIN 7024
Course	Capital Markets Analysis (M)
Coordinating Unit	Adelaide Business School
Term	Semester 1
Level	Postgraduate Coursework
Location/s	North Terrace Campus
Units	3
Contact	Up to 3 hours per week
Available for Study Abroad and Exchange	Y
Prerequisites	CORPFIN 7023, CORPFIN 7020, CORPFIN 7033,
Assessment	Exam/assignments/tests/presentation as prescribed at first lecture

Course Staff

Course Coordinator: Professor Ralf Zurbrugg

Asset Pricing
Name:              Ralf Zurbruegg
Location:          Room 12.21, 10 Pulteney Street, Adelaide
Telephone:        8313 5535
Email:               Ralf.Zurbrugg@adelaide.edu.au

Corporate Finance
Name:              Alfred Yawson
Location:          Room 12.42
Telephone:        8313 0687
Email:              alfred.yawson@adelaide.edu.au

Course Timetable

The full timetable of all activities for this course can be accessed from .

Course Learning Outcomes

Students will learn how to read and distill information from leading finance and accounting journals and gain an appreciation of the most recent, topical debates that are consuming capital markets research. In addition, as a ‘hands-on’ course, students will gain a

direct understanding of how and what processes are used to capture measurements that are commonly utilised in the applied research field. Specifically, students will learn how to download and handle large data sets, manipulate them, and calculate measurements from them.

By the end of this course students should be able to:

1 Be aware of current asset pricing discussions that are occurring around the world, in both academia and in practice.

2 Be aware of current corporate finance discussions that are occurring around the world, in both academia and in practice.

3 Be competent at reading and distilling information from research papers

4 Be competent at handling large datasets and derive common financial measurements from them

5 Present and communicate effectively to an audience about current theoretical and empirical research ideas in finance.

University Graduate Attributes

This course will provide students with an opportunity to develop the Graduate Attribute(s) specified below:

University Graduate Attribute	Course Learning Outcome(s)
Deep discipline knowledge informed and infused by cutting edge research, scaffolded throughout their program of studies acquired from personal interaction with research active educators, from year 1 accredited or validated against national or international standards (for relevant programs)	1,2
Critical thinking and problem solving steeped in research methods and rigor based on empirical evidence and the scientific approach to knowledge development demonstrated through appropriate and relevant assessment	3,4,5
Teamwork and communication skills developed from, with, and via the SGDE honed through assessment and practice throughout the program of studies encouraged and valued in all aspects of learning	5
Career and leadership readiness technology savvy professional and, where relevant, fully accredited forward thinking and well informed tested and validated by work based experiences	1-5

Learning & Teaching Activities

Learning & Teaching Modes

No information currently available.

Workload

The information below is provided as a guide to assist students in engaging appropriately with the course requirements.

This is an Honours/PhD-level course and therefore you will be expected to treat this course at least as a standard 12 unit university
course, implying that you are expected to commit to at least 9 hours of private study per week.

Students in this course are expected to attend all classes.

Learning Activities Summary

The course is comprised of two units, the first on Asset Pricing and the second on Corporate Finance. Lecture topics and basic reading lists are provided below.

Asset Pricing

1. A Primer on Asset Pricing: Utility Functions and Risk Aversion
      a. Readings
               i.   Chapter 1 from Pennacchi Theory of Asset Pricing
              ii.    Esterlin (2003) Explaining Happiness
            iii.   Material from the Prospect Theory presentation

2. A Primer on Asset Pricing: General Equilibrium vs No Arbitrage Models and the Stochastic Discount Factor Approach
      a. Readings
               i.    Chapter 1 from Cochrane Asset Pricing
              ii.    Chapters 13 and 14 from Hull Options, Futures and other Derivatives
              iii.   Koci’s thesis on SDF and GMM
              iv.   Campbell’s (2000) Asset Pricing and the Millennium
               v.   Material from the BSM and CAPM presentations

3. Long Run Trends, Market Efficiency and Implications for Stock Price Predictability
       a. Readings
               i.   Chapters 7 and 8 of Brooks Introductory Econometrics for Finance
              ii.    Hendry and Juselius Explaining Cointegration Analysis: Part 1
              iii.   Royal Swedish Academy of Sciences Time Series Econometrics
            iv.   Chapter 20 of Cochrane Asset Pricing
            v.    Cochrane (2008), Lettau and Ludvigson (2001), Fama and French (1988, 1989), Campbell and Shiller (1988)

4. Empirical evidence on risk premiums and some behavioural finance considerations
         a. Readings

i.    Jagannathan and Wang (1993), Lettau and Ludvigson (2001), Campbell and Vuolteenaho (2002), Ang, Hodrick, Xing and Zhang (2009), Ni (2007), Sharpe and Amromin (2005), Dimson, Marsh and Staunton (2005), Odean and Barber (2000), Goetzmann and Kumar (2005), Chan, Covrig and Ng (2005),
                ii.   Material from the Lotteries presentation

5. Stock Price Informativeness, financial intermediaries, and some behavioural finance considerations
          a. Readings
                i.   Roll (1988), Morck, Yeung and Yu (2000), Piotroski and Roulstone (2004), Eun, Wang and Xiao (2015)

6. At the micro-level: time-varying volatility, liquidity and an introduction to market microstructure models
          a.   Readings
i.   Amihud and Mendelson (1989), Chordia, Roll, and Subrahmanyam (2000), Huang and Stoll (1997), Engle (2001) GARCH 101
               ii. Chapter 13 of Bali, Engle and Murray Empirical Asset Pricing: The Cross Section of Stock Returns
               iii. Royal Swedish Academy of Sciences Time Series Econometrics
               iv. Chapters 1-3 of Foucault, Pagano and Roeell, Market Liquidity

Corporate Finance

0. Pre-course reading

i. Modigliani, Franco, and Merton Miller, 1958. The Cost of Capital, Corporation Finance and the Theory of Investment, American Economic Review 48, 261-297.

ii. Betrand, Marianne and Antoinetter Schoar, 2003. Managing with style: The effects of managers on firm policies, Quarterly Journal of Economics 118, 1169-1208.

iii. Eckbo, E. Masulis, R. Norli, O. 2006. Security Offerings, in B. Espen Eckbo (ed.), Handbook of Corporate Finance: Empirical Corporate Finance, Volume A, (Handbooks in Finance Series, Elsevier/North-Holland), Chapter 6.
iv. Sandra Betton, B. Espen Eckbo, Karin S. Thorburn, 2008. Corporate takeovers, in B. Espen Eckbo (ed.), Handbook of Corporate Finance: Empirical Corporate Finance, Volume 2, (Handbooks in Finance Series, Elsevier/North-Holland).
                v. Shleifer, A. and R. Vishny, 1997. "A Survey of Corporate Governance, Journal of Finance, 52, 737-783.

1. Capital structure
       a. Readings
i. Titman, Sheridan, and Roberto Wessels, 1988. The Determinants of Capital Structure Choice, Journal of Finance           1-19.
ii. Fama, Eugene, and Kenneth French, 2005. Financing Decisions: Who Issues Stock? Journal of Financial Economics 76, 549–582.

iii. Lemmon, Michael, Michael Roberts, and Jaime Zender, 2008. Back to the Beginning: Persistence and the Cross-section of Corporate Capital Structure, Journal of Finance 63, 1575–1608.
iv. DeAngelo, H.,Roll,R., 2015. How Stable are Corporate Capital Structures? Journal of Finance 70, 373–418.

2. Capital Raising
      a.. Readings
i. Alexander Ljungqvist, 2006. IPO Underpricing” in B. Espen Eckbo (ed.), Handbook of Corporate Finance: Empirical    Corporate Finance, Volume A, (Handbooks in Finance Series, Elsevier/North-Holland), Chapter 7
                       ii. Ritter, J.R., 1987. The Costs of Going Public, Journal of Financial Economics 19, 269-282.
iii. Masulis, Ronald W., and Ashok N. Korwar, 1986. Seasoned Equity Offerings: An Empirical Investigation, Journal of Financial Economics 15, 91–118.

iv. Mikkelson, Wayne H., and Megan M. Partch, 1986. Valuation Effects of Security Offerings and the Issuance   Process, Journal of Financial Economics 15, 31–60.
                       v. Asquity, Paul, and Mullins, 1986. Equity Issues and Offering Dilution. Journal of Financial Economics 15, 61−89.

3. The Market for Corporate Control
       a. Readings
                       i. Andrei Shleifer, Robert W. Vishny, 2003, Stock Market Driven Acquisitions, Journal of Financial Economics, Volume
         70, 295-311.

ii. Masulis, R., Wang, C., Xie, F., 2007. Corporate Governance and Acquirer Returns. Journal of Finance, 62:    1851-1889.

iii. Harford, J., Humphery-Jenner, M., Powell, R. G., 2012. The Sources of Value Destruction in Acquisitions by Entrenched Managers. Journal of Financial Economics, 106: 247-261.

iv. Ahern, Kenneth R., 2012. Bargaining Power and Industry Dependence in Mergers. Journal of Financial Economics, 103: 530-550.
                       v. Golubov, A. Yawson, A. Zhang, H., 2015. Extraordinary Acquirers. Journal of Financial Economics, 116: 314-330.                        vi. Albert Sheen. 2014. The Real Product Market Impact of Mergers. The Journal of Finance, 69, 2651 – 2688.

4. Role of Investment Banking in Corporate Finance
        a. Readings
i. Corwin, S. A., Schultz, P., 2005. The role of IPO Underwriting Syndicates: Pricing, Information Production, and Underwriter Competition. Journal of Finance, 60: 443-486.

ii. Golubov, A., Petmezas, D., Travlos, N. G., 2012. When it Pays to Pay your Investment Banker: New Evidence on the Role of Financial Advisors in M&As. Journal of Finance, 67: 271-312.

iii. Agrawal, A., Cooper, T., Lian, Q., Wang, Q., 2013. Common Advisers in Mergers and Acquisitions: Determinants and Consequences. Journal of Law and Economics, 56: 691-740.
                       iv. Sibilkov, Valeriy, McConnell, John J., 2014. Prior Client Performance and the Choice of Investment Bank Advisors in
                       Corporate Acquisitions. Review of Financial Studies, 27: 2475-2503.
v. Bao, J., Edmans, A., 2011. Do Investment Banks Matter for M&A Returns? Review of Financial Studies, 24: 2286-2315.

vi. Olivier Dessaint, O., Golubov, A., Volpin, P. 2017. Employment protection and takeovers, Journal of Financial     Economics 125, 369-388

5. Corporate Governance – Chief Executive Officers
         a.   Readings
                      i. Malmendier, U., Tate, G., 2009. Superstar CEOs. Quarterly Journal of Economics, 124: 1593-1638.

ii. Custódio, C., Metzger, D., 2014. Financial Expert CEOs: CEO×³s work Experience and Firm×³s Financial Policies. Journal of Financial Economics, 114: 125-154.

iii. Custódio, C., Metzger, D., 2013. How do CEOs Matter? The Effect of Industry Expertise on Acquisition Returns. Review of Financial Studies, 26: 2008-2047.

iv. Banerjee, S., Humphery-Jenner, M., Nanda, V., 2015. Restraining Overconfident CEOs through Improved Governance: Evidence from the Sarbanes-Oxley Act. Review of Financial Studies, 28: 2812-2858.

6. Corporate Governance – Board of Directors
        a. Readings

i. Hermalin, B. and M. Weisbach, 1998. Endogenously Chosen Boards of Directors and Their Monitoring of Management, American Economic Review 88, 96 118.

ii. Adams, R., B. Hermalin and M. Weisbach, 2010. Boards of Directors and their Role in Corporate Governance: A Conceptual Framework and Survey, Journal of Economic Literature 48, 58-107.
                      iii. Cai, J. I. E., Garner, J. L., Walkling, R. A., 2009. Electing directors. The Journal of Finance, 64: 2389-2421.

iv. Bouwman, C. H. S., 2011. Corporate Governance Propagation through Overlapping Directors. Review of Financial Studies, 24: 2358-2394.
                      v. Ran Duchin, John G. Matsusaka, Oguzhan Ozbas, 2008. When are Outside Directors Effective? Journal of
Financial Economics 96, 195-214.

vi. Bang Dang Nguyen, Kasper Meisner Nielsen, 2010. The Value of Independent Directors: Evidence from Sudden Deaths, Journal of Financial Economics 98, 550-567

vii. Rüdiger Fahlenbrach, Angie Low, René M. Stulz Why do Firms Appoint CEOs as Outside Directors? Journal of Financial Economics, Volume 97, Issue 1, July 2010, Pages 12-32

The University's policy on Assessment for Coursework Programs is based on the following four principles:

Assessment must encourage and reinforce learning.
Assessment must enable robust and fair judgements about student performance.
Assessment practices must be fair and equitable to students and give them the opportunity to demonstrate what they have learned.
Assessment must maintain academic standards.

Assessment Summary

The assessment components are as follows:

Assessment	Due Date and time	Requirement
ASSET PRICING
Individual homework (20%)	Homework must be submitted at the start of each lecture (unless other instructions provided)	You must submit homework for all exercises that are set. Work will be graded based on effort, not necessarily success in completing the tasks.
Group Presentation (10%)	This is determined in the class, but usually you have one to two weeks to complete this task	You must work in a pair to complete one of the assignments that are offered during the classes. To pass this assessment you must satisfactorily complete the presentation.
CORPORATE FINANCE
Individual homework (20%)	Homework must be submitted at the end of each lecture (unless other instructions provided)	You must submit homework for all exercises that are set. Work will be graded based on effort, not necessarily success in completing the tasks.
Group Presentation (10%)	This is determined in the class, but usually you have one to two weeks to complete this task	You must work in a pair to complete one of the assignments that are offered during the classes. To pass this assessment you must satisfactorily complete the presentation.
Exam (40%)	TBA during exam weeks	A closed-book, in-class test.

Assessment Detail

No information currently available.

Submission

No information currently available.

Course Grading

Grades for your performance in this course will be awarded in accordance with the following scheme:

M10 (Coursework Mark Scheme)
Grade	Mark	Description
FNS		Fail No Submission
F	1-49	Fail
P	50-64	Pass
C	65-74	Credit
D	75-84	Distinction
HD	85-100	High Distinction
CN		Continuing
NFE		No Formal Examination
RP		Result Pending

Further details of the grades/results can be obtained from Examinations.

Grade Descriptors are available which provide a general guide to the standard of work that is expected at each grade level. More information at Assessment for Coursework Programs.

Final results for this course will be made available through .

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