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Prof. Leonardo Becchetti PROGRAM 1) Introduction. Measures of risk: first order and second order stochastic dominance, risk aversion and risk neutrality; the market of insurance. Contingent goods and contingent markets. 2) CAPM model. Portfolio choice. Separation theorem. 3) Predictability of asset returns (theory and practice) Random walk hypotheses: i) IID increments; ii) independent increments; iii) incorrelated increments. Tests of random walk hypotheses: Sequences, reversals and runs. Autocorrelation coefficients, variance ratios. Recent empirical evidence on asset returns: autocorrelations, variance ratios, cross-autocorrelation and lead-lag relations, contrarian strategies. 4) Event study analysis (theory and practice) Outline of an event study. Models for measuring normal performance: constant mean return model, Market model, other statistical and economic models. Measuring and analyzing abnormal returns. Modifying the null hypothesis. Analysis of power, Nonparametric tests, Cross sectional models.Empirical evidence on an event study analysis: the example of abnormal returns on M&A announcements 5) Pricing of equities (theory and practice) Present value relations. The relation between prices, dividends and returns, discounted cash flow measures of fundamentals. Rational bubbles. The linear present value relation with constant expected returns. An approximate present value relation with time varying expected returns. Present value relations and US stock price behaviour. Empirical evidence on implicit risk premia and earnings forecast bias. LIST OF REFERENCES