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Regular version of the site

Investment in Equities in Non-efficient Markets

Academic Year
Instruction in Russian
ECTS credits
Delivered at:
School of Finance
Course type:
Elective course
2 year, 1, 2 module


Программа дисциплины


The course consists of two equal parts. The first part of the course is devoted to bubbles on financial markets as the most serious manifestations of their irrationality. The students learn the history of the major bubbles, theories explaining them, preconditions and signs of a bubble’ formation, and types of economic objects that are the best platforms for bubbles formation. The second part of the course deals with the value investing approach that hedges against investing in bubbles and losing money. According to numerous studies, investment in value shares generates abnormal return. Value investing strategy is the best performing strategy among a wide list of quantitative strategies as concluded by Morgan Stanley. During the course we learn the results of value investing studies, the names and returns of the best value investors, their investment principles and requirements to the companies suitable for investment. In a practical part of the course the student search for the companies that are good investment targets both from the point of view of their operational results and valuations. The course has both theoretical and practical applicability.
Цель освоения дисциплины

Цель освоения дисциплины

  • The major aim of the course is to familiarize students with realities of the financial markets and theories explaining them and to teach them the basics of rational approach to investment in shares that will help them to grow as investors, financial analysts or asset managers in the future.
Планируемые результаты обучения

Планируемые результаты обучения

  • The students will become familiar with the behavior of financial markets and value investing
Содержание учебной дисциплины

Содержание учебной дисциплины

  • Part 2. Value investing
    Topic 1. Introduction into value investing. Topic 2. The long-term competitive advantage. Investing in value and growth stocks (empirical results). Topic 3. Winning strategies in the stock market. Do they exist? Topic 4. The EMH and the phenomenon of Warren Buffett. Тopic 5. A construction of investment portfolio based on value investing principles. A practical exercise (students’ presentations).
  • Part 1. Inefficient financial markets
    Topic 1. Efficient markets hypothesis (EMH) and its disproves. The Black Swan consept. EMH and behaviorism. Topic 2. Risk and return in the financial markets in the USA and globally. Topic 3. Market anomalies of XVIII century (tulipmania, the South Sea bubble, the Mussissippi company. Topic 4. The financial bubbles of XIX century (the emerging markets bubble of the 1830-s, the railway mania and others). Topic 5. The bubble of the first half of the XX century (Florida real estate boom, the great prosperity of the 1920-es. Topic 6. The bubble of the second half of the XX century (the Japanese bubble, the technological boom, the mortage bubble). Topic 7. Phycological and sociological theories of herd behavior and their applicability of the explanations of financial bubbles. The information cascade theory. Topic 8. The Economic and financial models of financial bubbles. Topic 9. Signs and preсonditions of a financial bubble.
Элементы контроля

Элементы контроля

  • неблокирующий Essay
  • неблокирующий Presentations
  • неблокирующий Attendance
Промежуточная аттестация

Промежуточная аттестация

  • Промежуточная аттестация (2 модуль)
    The following formula is used for evaluation of students: Gfinal= 100%* Gaccumulated The accumulated grade is calculated as follows: Gfinal= 35%* Gessay + 35%* Gpresentations + 30%* Gatttendance, where Gessay – the average grade for two essays (10 points each) Gpresentations – the average grade for two group presentations (10 points each)
Список литературы

Список литературы

Рекомендуемая основная литература

  • Akerlof, G. A. (1970). The Market for “Lemons”: Quality Uncertainty and the Market Mechanism. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.CAA2734F
  • Banerjee, A. V. (1992). A simple model of herd behavior. Quarterly Journal of Economics, 107(3), 797. https://doi.org/10.2307/2118364
  • Bikhchandani, S., Hirshleifer, D., & Welch, I. (1992). A theory of fads, fashion, custom, and cultural change as informational cascades. Journal of Political Economy, 100(5), 992. https://doi.org/10.1086/261849
  • Cai, J. (1997). Glamour and Value Strategies on the Tokyo Stock Exchange. Journal of Business Finance & Accounting, 24(9/10), 1291–1310. https://doi.org/10.1111/1468-5957.00163
  • Campbell, G., & Turner, J. (2010). ‘The Greatest Bubble in History’: Stock Prices during the British Railway Mania. MPRA Paper.
  • Chan, L. K. C., Jegadeesh, N., & Lakonishok, J. (1995). Evaluating the performance of value versus glamour stocks The impact of selection bias. Journal of Financial Economics, 3, 269.
  • De Long, J. B., & Shleifer, A. (1991). The stock market bubble of 1929: evidence from closed-end mutual funds.
  • Demyanyk, Y., & Van Hemert, O. (2009). Understanding the Subprime Mortgage Crisis. https://doi.org/10.1093/rfs/hhp033
  • Edward Glaeser, Wei Huang, Yueran Ma, & Andrei Shleifer. (2017). A Real Estate Boom with Chinese Characteristics. Journal of Economic Perspectives, 1, 93. https://doi.org/10.1257/jep.31.1.93
  • Ellen R. Mcgrattan, & Edward C. Prescott. (2001). The Stock Market Crash of 1929: Irving Fisher was Right!” Federal Reserve Bank of Minneapolis, staff report.
  • Fama, E. F. (1965). The Behavior of Stock-Market Prices. Journal of Business, 38(1), 34–105. https://doi.org/10.1086/294743
  • Fama, E. F. (1998). Market efficiency, long-term returns, and behavioral finance. Journal of Financial Economics, 3, 283.
  • Flores, J.-H., & Flandreau, M. (2007). Bonds and Brands : intermediaries and reputation in sovereign debt markets 1820-1830. IFCS - Working Papers in Economic History.WH.
  • François R. Velde, Christophe Chamley, Antoin Murphy, Larry Neal, Tom Sargent, Chris Sleet, & Daniel Szpiro. (n.d.). Government Equity and Money: John Law’s System in 1720 France. Working paper 31, Federal Reserve Bank of Chicago.
  • Garber, P. M. (1989). Tulipmania. Journal of Political Economy, 3, 535. https://doi.org/10.1086/261615
  • Gigerenzer, G. (2001). Decision making: Nonrational theories.
  • Giorgio Fodor. (2002). The boom that never was? Latin American loans in London 1822-1825. Department of Economics Working Papers.
  • Goetzmann, W. N., & Jorion, P. (1999). Re-Emerging Markets. Journal of Financial and Quantitative Analysis, 01, 1.
  • Graham, B., & Zweig, J. (2003). The Intelligent Investor : A Book of Practical Counsel: Vol. Rev. ed. / updated with new commentary by Jason Zweig. HarperCollins.
  • Gregory, A., Harris, R. D. F., & Michou, M. (2001). An Analysis of Contrarian Investment Strategies in the UK. Journal of Business Finance & Accounting, 28(9/10), 1192. https://doi.org/10.1111/1468-5957.00412
  • Grossman, S. J., & Stiglitz, J. E. (1976). Information and Competitive Price Systems. American Economic Review, 66(2), 246.
  • Jorion, P., & Goetzmann, W. N. (1999). Global Stock Markets in the Twentieth Century. Journal of Finance (Wiley-Blackwell), 54(3), 953–980. https://doi.org/10.1111/0022-1082.00133
  • Lakonishok, J., Shleifer, A., & Vishny, R. W. (1994). Contrarian Investment, Extrapolation, and Risk.
  • MILLER, E. M. (1977). Risk, Uncertainty, and Divergence of Opinion. Journal of Finance (Wiley-Blackwell), 32(4), 1151–1168. https://doi.org/10.1111/j.1540-6261.1977.tb03317.x
  • Minsky, H. P. (1992). The Financial Instability Hypothesis. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.FB89C7AD
  • OFEK, E., & RICHARDSON, M. (2003). DotCom Mania: The Rise and Fall of Internet Stock Prices. Journal of Finance (Wiley-Blackwell), 58(3), 1113–1137. https://doi.org/10.1111/1540-6261.00560
  • Olivier J. Blanchard, & Mark W. Watson. (1982). Bubbles, Rational Expectations and Financial Markets. NBER Working Papers.
  • Peter M. Garber. (1990). Famous First Bubbles.
  • Philip A. Fisher. (2003). Common Stocks and Uncommon Profits and Other Writings. Wiley.
  • Rappoport, P., & White, E. N. (1993). Was There a Bubble in the 1929 Stock Market? The Journal of Economic History, 03, 549.
  • Rappoport, P., & White, E. N. (1994). Was the Crash of 1929 Expected? American Economic Review, 1, 271.
  • Robert J. Shiller. (2003). From Efficient Markets Theory to Behavioral Finance. Journal of Economic Perspectives, 1, 83. https://doi.org/10.1257/089533003321164967
  • Sahlman, W. A., & Stevenson, H. H. (1985). Capital market myopia. Journal of Business Venturing, 1, 7.
  • Shiller, R. J. (1990). Speculative Prices and Popular Models. Journal of Economic Perspectives, 4(2), 55–65. https://doi.org/10.1257/jep.4.2.55
  • Shleifer, A., & Vishny, R. W. (1997). The Limits of Arbitrage. Journal of Finance (Wiley-Blackwell), 52(1), 35–55. https://doi.org/10.1111/j.1540-6261.1997.tb03807.x
  • Sirkin, G. (1975). The Stock Market of 1929 Revisited: A Note. Business History Review, 02, 223.
  • The Journal of Finance. Vol.52, N.1, , 1997
  • Tirole, J. (1982). On the Possibility of Speculation under Rational Expectations. Econometrica, 5, 1163.
  • von Hayek, F. A. (1974). The Pretence of Knowledge. Nobel Prize in Economics Documents.
  • Wenner, A. (1997). You Can Be a Stock Market Genius (Even If You’re Not Too Smart): Uncover the Secret Hiding Places of Stock Market Profits. Library Journal, 122(7), 92.
  • Wiggins, R. R., & Ruefli, T. W. (2002). Sustained Competitive Advantage: Temporal Dynamics and the Incidence and Persistence of Superior Economic Performance. Organization Science, 13(1), 82–105. https://doi.org/10.1287/orsc.

Рекомендуемая дополнительная литература

  • George J. Stigler. (1961). The Economics of Information. Journal of Political Economy, 213. https://doi.org/10.1086/258464
  • Lones Smith, & Peter Norman Sørensen. (n.d.). Observational Learning.
  • Louis K. C. Chan, Narasimhan Jegadeesh, & Josef Lakonishok. (1996). Momentum strategies.
  • R. Mehra, & E. Prescott. (2010). The equity premium: a puzzle. Levine’s Working Paper Archive.