Philip H. Dybvig
Washington University in Saint Louis
Some paper suggestions: http://dybfin.wustl.edu/teaching/topicsquantfin19-shared
Final Exam The final exam will be based on all the classes (including the ones I taught). While the papers have a fair amount of mathematics, the exam will not have any. The questions should be answered using simple English to explain the economics. There is more information on the cover of the sample exam, which is from another year's class. Note that the set of papers covered in the other year was different, and therefore many of the questions and answers are probably unfamiliar to you.
Here is the sample exam and an answer sheet. Each question has two parts: the first part is factual and the second part asks for an opinion, which should be supported briefly. Due to the nature of the exam there are many correct answers to the opinion part of each question.
...final exam pdf size 37K
...suggested answers pdf size 51K
(IMPORTANT) Note that the exam will be closed-book, and that you are not permitted to use any notes or electronics on the exam. There is more information on this on the sample exam and in the syllabus.
To prepare for the exam, I recommend looking at your classmates' slides and the papers below.
Papers Each week we will discuss, in my lectures or in the student presentations, interesting papers. I have some suggested papers you can choose; see http://dybfin.wustl.edu/teaching/topicsquantfin19-shared/index.html. Or, if you want to choose a topic not available there, let me know the topic or topics you are interested in, and the TA and I will help you to find a suitable paper to present.
I will be posting the papers for this section on this web site. Some of the links use the university's library proxy server, and therefore if you access them from off-campus you will need to use your WUSTL KEY. If you do not have a WUSTL KEY, you can copy and paste any jstor addresses into your browser, and access will be free if you are accessing the internet through an appropriate IP address from a participating university. Some of the links will only work within Wash U.
Topic 1 Bubbles, Doubling Strategies, Suicidal Strategies, and Verification
(August 27 and 29) Shell, Karl, 1971, "Notes on the Economics of Infinity," 1971, Journal of Political Economy 79. Stable URL: http://www.jstor.org/stable/1830269.
(August 27 and 29) Dybvig, Philip H. "Perpetual American Put: valuation and verification theorem," lecture notes, link
Topic 2 Textual Analysis Tools
(August 29) Tetlock, P. C. (2007). Giving content to investor sentiment: The role of media in the stock market. The Journal of finance, 62(3), 1139-1168. https://www.jstor.org/stable/4622297 Slides by Yutong Xiong
Topic 3 Indian Economy
(Sept 3) Rajan, Raghuram, "India in the global economy," First Ramnath Goenka Memorial Lecture. http://www.bis.org/review/r160316b.pdf Slides by Vaibhav Sharma
Topic 4 Credit risktheory:
(Sept 3) Duffie, Darrell, and Singleton, Kenneth L., 1999, "Modeling Term Structures of Defaultable Bonds," Journal of Financial Studies 12, 687-720. Stable URL: http://www.jstor.org/stable/2645962 Slides by Xicheng Jiang
(Sept 24) Collin-Dufresne, Pierre, Robert S. Goldstein, and Fan Yang, 2012, "On the Relative Pricing of Long Maturity Index Options and Collateralized Debt Obligations," Journal of Finance 67, 1983-2014. Stable URL: http://www.jstor.org/stable/23324366 Slides by Adele Song
Topic 5 Predicting stock returns
(Sept 5) Han, Yufeng and He, Ai and Rapach, David and Zhou, Guofu, Firm Characteristics and Expected Stock Returns (August 6, 2019). https://ssrn.com/abstract=3185335 Slides by Ziqi Tan
Topic 6 Trade and Chinese Markets
(Sept 5) Bown, Chad P., 2019, "The 2018 US-China Trade Conflict After 40 Years of Special Protection," working paper, https://www.piie.com/system/files/documents/wp19-7.pdf. More background: Chad P. Bown and Eva (Yiwen) Zhang, 2019, "Will a US-China Trade Deal Remove or Just Restructure the Massive 2018 Tariffs?" https://www.piie.com/blogs/trade-and-investment-policy-watch/will-us-china-trade-deal-remove-or-just-restructure-massive Slides by Jason Qiao
(Oct 3) Yao, Wen, and Xiaodong Zhu, 2018, "Structural Change and Aggregate Employment Fluctuations in China and the US", working paper, https://www.economics.utoronto.ca/index.php/index/research/workingPaperDetails/600 Slides by Wesley Chen
Topic 7 Anti-corruption Campaign
(Sept 10) Lin, Chen, Randall Morck, Bernard Yeung, and Xiaofeng Zhao, 2016, Anti-Corruption Reforms and Shareholder Valuations: Event Study Evidence from China, 2016 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2729087 Slides by Qi Zhou
Topic 8 Fund Performance
(Sept 10) Zhu, Min, 2018, "Informative Fund Size, Managerial Skill and Investor Rationality," Journal of Financial Economics, forthcoming. WashU link Slides by Kay Song
Topic 9 Finance in Africa
(Sept 12) Blavy, Rodolphe, Anupam Basu, and Murat A Yulek, 2004, Microfinance in Africa : Experience and Lessons From Selected African Countries, IMF Working paper, https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Microfinance-in-Africa-Experience-and-Lessons-From-Selected-African-Countries-17710 Slides by Liyu (Lily) Li
Topic 10 Employee Stock Options
(Sept 12) Dybvig, Philip H. and Mark Loewenstein, 2003, "Employee Reload Options: Pricing, Hedging, and Optimal Exercise," Review of Financial Studies 16, 2003, 145-171. Stable URL: http://www.jstor.org/stable/1262728 Slides by Yifan Yu
Topic 12 Negative interest rates
(Sept 17) Heider, Florian, Farzad Saidi, and Glenn Schepens, 2017, Life Below Zero: Bank Lending Under Negative Policy Rates, working paper. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2788204 Slides by Yuwen Wang
Topic 13 Investments, picking stocks, and accounting numbers
(Sept 17) Nissim, Doron, and Stephen H. Penman, 2001, "Ratio Analysis and Equity Valuation: From Research to Practice," Review of Accounting Studies 6, 109-54. WashU link Slides by Zijin Wu
Topic 14 Understanding the financial crisis.
(Sept 19) Prescott, Edward Simpson, 2010, "Introduction to the Special Issue on the Diamond-Dybvig Model," Federal Bank of Richmond Economic Quarterly, First Quarter 2010. Link: http://www.richmondfed.org/publications/research/economic_quarterly/2010/q1/pdf/prescott.pdf Slides by Yingkun Ding
(Oct 1) Gorton, Gary, and Andrew Metrick, Securitized Banking and the Run on Repo, 2012, Journal of Financial Economics 104, 425-51. WashU link Slides by Di Zhou
(Oct 3) Diamond, Douglas W., and Philip H. Dybvig, 1986, Banking Theory, Deposit Insurance, and Bank Regulation, Journal of Business 59, 55-68. Stable URL: http://www.jstor.org/stable/2352687 Slides by Pu (Fiona) Liu
Topic 15 Investing with Transaction Costs
(Sept 19) Dybvig, Philip H., 2005, "Mean-Variance Portfolio Rebalancing with Transaction Costs," working paper. pdf file Slides by Jingxuan Zou
Topic 16 Risk management
(Sept 26) Jorion, Philippe, 2000, "Risk Management Lessons from Long-Term Capital Management," European Financial Management 6, 277-300. WashU link Slides by Yichen Liu
(Sept 26) Pirrong, Stephen Craig, 1997, "Metallgesellschaft: A Prudent Hedger Ruined, or a Wildcatter on NYMEX?" Journal of Futures Markets 17(5) 543-78. WashU link Slides by Shuang Tang
Topic 17 Market manipulation
(Oct 1) Griffin, John M., and Amin Shams, "Manipulation in the VIX?" working paper https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2972979 Slides by Amber Yang