International Finance

Studienzentrum Gerzensee

Doctoral Course August 3 - 7, 1998

Campbell R. Harvey

Fuqua School of Business, Duke University, Durham, NC

National Bureau of Economic Research, Cambridge, MA

Course Description

The goal of this course is to give a unique perspective on the some of the most challenging problems in international finance. The course is designed to challenge the doctoral student with problems, many of which have not been solved yet, whose solution could impact the practice of financial management. In this course, more questions are raised than answered.

The idea of the course is not to go through in detail all of the assigned reading. It will be assumed that students have read each of the articles. The classroom discussion will be broad and will not necessarily focus on any technical details in the readings. We are more interested in extracting the big picture and what it means for the future of finance.

Prerequisites

This course will not deal with the basics of empirical international finance. A detailed knowledge of the main asset pricing models and the appropriate econometric tools is assumed. The recommended preparation is the text by Campbell, Lo and MacKinlay.

Problem Set

There is one problem set which must be completed and emailed to me.

Outside Class Contact

Grading

Hypertexts

Outline and Reading Assignments

0. Pre-August 3

Overview and prerequisites.

Visit My Web Site!

Read Campbell, Lo and MacKinlay (1997)

1. August 3 morning I

Course introduction.

Domestic and International Asset Pricing Frameworks: An Economic Perspective [hlink not yet available]

Readings:

Ferson and Jagannathan (1996)

Fama (1991)

Ferson (1993)

Ferson and Harvey (1991)

2. August 3 morning II

Conditioning Information [hlink not yet available]

Readings:

Ferson and Siegel(1998)

Harvey (1991)

3. August 4 morning I

Unconditional Empirical Tests [hlink not yet available]

Readings:

Fama and French(1996)

Ferson and Harvey (1994)

4. August 4 morning II

Conditional Empirical Tests [hlink not yet available]

Readings:

Harvey (1991)

Ferson and Harvey (1993)

Ferson and Harvey (1998a)

Ferson and Harvey (1998b)

Ghysels(1998)

Jagannathan and Wang(1996)

Kirby(1998)

5. August 5 morning I

Foreign Exchange Risk [hlink not yet available]

Readings:

Ferson and Harvey (1993, 1994)

Harvey (1995b)

Harvey (1995c)

6. August 5 morning II

Other Sources of Risk [hlink not yet available]

Readings:

Erb, Harvey and Viskanta (1995a)

Erb, Harvey and Viskanta (1995b)

Erb, Harvey and Viskanta (1996b)

Erb, Harvey and Viskanta (1997a)

Harvey and Siddique (1998a)

Harvey and Siddique (1998b)

Bekaert, Erb, Harvey and Viskanta (1997)

Fama and French (1992)

Fama and French (1993)

Fama and French (1998)

7. August 6 morning I

Market Integration [hlink not yet available]

Readings:

Bekaert and Harvey (1995)

Bekaert and Harvey (1997)

Chen and Knez(1995)

8. August 6 morning II

Application: Understanding Risk and Return in Emerging Markets

Readings:

Harvey (1995a)

Harvey (1995b)

Harvey (1995d)

Harvey (1998)

Erb, Harvey and Viskanta (1997b)

Erb, Harvey and Viskanta (1997c)

9. August 7 morning I

Application: Performance Evaluation

Readings:

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Ferson and Schadt (1996)

Chen and Knez (1996)

Graham and Harvey (1996)

Bansal and Harvey (1997)

Farnsworth, Ferson, Todd and Yomtov (1995)

Rouwenhorst(1998)

Christopherson, Ferson and Glassman(1998)

9. August 7 morning II

New Directions for Research in International Finance

Readings:

Glodjo and Harvey (1995)

Dumas, Harvey and Ruiz (1998)

Articles and Books

Bansal, Ravi and Campbell R. Harvey, 1997, ``Performance Evaluation in the Presence of Dynamic Trading Strategies,''

Bekaert, Geert and Campbell R. Harvey, ``Time-Varying World Market Integration,'' with Geert Bekaert, Journal of Finance(1995): 403-444.

Bekeart, Geert and Campbell R. Harvey ``Emerging Equity Market Volatility,'' Journal of Financial Economics (1997): 43:1, January, 29-78.

Bekeart, Geert and Campbell R. Harvey, 1998a, ``Foreign Speculators and Emerging Equity Markets,"

Bekeart, Geert and Campbell R. Harvey, 1998b, ``Capital Flows and the Behavior of Emerging Market Equity Returns,"

Bekeart, Geert, Campbell R. Harvey and Robin Lumsdaine, ``Dating the Integration of World Capital Markets,"

Bekaert, Geert, Claude B. Erb, Campbell R. Harvey and Tadas E. Viskanta, ``Distributional Characteristics of Emerging Market Returns and Asset Allocation," Journal of Portfolio Management (1998), Winter, forthcoming.

Campbell, John, Andrew Lo and Craig MacKinlay, 1997, The Econometrics of Financial Markets, Princeton University Press, 1997.

Carhart, Mark M., Robert J. Krail, Ross L. Stevens, and Kelly D. Welsh, 1996, ``Testing the Conditional CAPM," Unpublished working paper, University of Southern California, Los Angeles, CA.

Chen, Zhiwu and Peter J. Knez, 1996, ``Portfolio Performance Measurement: Theory and Applications," Unpublished working paper, University of Wisconsin-Madison, Madison, WI.

Cochrane, John, 1996 ``Discrete-Time Empirical Finance," Unpublished manuscript, University of Chicago, Chicago, IL.

Dumas, Bernard, Campbell R. Harvey and Pierre Ruiz, 1998, ``Are Common Swings in International Stock Returns Justified by Subsequent Changes in National Outputs,"

Erb, Claude B., Campbell R. Harvey and Tadas E. Viskanta, 1994, ``Forecasting International Equity Correlations,'' Financial Analysts Journal November/December 32-45.

Erb, Claude B., Campbell R. Harvey and Tadas E. Viskanta, 1995a ``Do World Markets Still Serve as a Hedge?,'' Journal of Investing Fall 23-46.

Erb, Claude B., Campbell R. Harvey and Tadas E. Viskanta, 1995b, ``Inflation and World Equity Selection,'' Financial Analysts Journal, November-December, 28-42.

Erb, Claude B., Campbell R. Harvey and Tadas E. Viskanta, 1996a, ``Expected Returns and Volatility in 135 Countries" Journal of Portfolio Management Spring, pp. 46-58.

Erb, Claude B., Campbell R. Harvey and Tadas E. Viskanta, 1996b, ``Political Risk, Financial Risk and Economic Risk,'' Financial Analysts Journal November/December 52:6, 28-46.

Erb, Claude B., Campbell R. Harvey and Tadas E. Viskanta, 1997a, ``Demographics and International Investment," Financial Analysts Journal forthcoming.

Erb, Claude B., Campbell R. Harvey and Tadas E. Viskanta, 1997b, ``The Making of an Emerging Market," Emerging Markets Quarterly 1:1 14-19.

Erb, Claude B., Campbell R. Harvey and Tadas E. Viskanta, 1997c, ``What Matters for Emerging Market Investment," Emerging Markets Quarterly 1:2, 17-46.

Erb, Claude B., Campbell R. Harvey and Tadas E. Viskanta, 1998 ``Emerging Market Bonds: An Asset Class Perspective,"

Fama, Eugene F., 1991, ``Efficient Capital Markets: II," Journal of Finance 46: 1575-1617.

Fama, Eugene F. and Kenneth R. French, 1992, ``The Cross-Section of Expected Stock Returns" Journal of Finance 47, 427-465.

Fama, Eugene F. and Kenneth R. French, 1993, ``Common Risk Factors in the Returns on Stocks and Bonds," Journal of Financial Economics 33, 3-56.

Fama, Eugene F. and Kenneth R. French, 1998, Value vs. Growth: International Evidence, Working paper, University of Chicago

Farnsworth, Heber, Wayne Ferson, Steven Todd and Bernard Yomtov, 1995, ``Conditional Performance Evaluation," Unpublished working paper, University of Washington, Seattle, WA

Wayne E. Ferson, 1993, ``Theory and Empirical Testing of Asset Pricing Models," Handbooks in OR & MS 9, 145-200.

Ferson, Wayne E. and Campbell R. Harvey, 1993, ``The Risk and Predictability of International Equity Returns'' Review of Financial Studies.

Ferson, Wayne E. and Campbell R. Harvey, 1994, ``Sources of Risk and Expected Returns in Global Equity Markets,'' with Wayne Ferson, Journal of Banking and Finance 775-803.

Ferson, Wayne E. and Campbell R. Harvey, 1998a, ``Fundamental Determinants of International Equity Returns: A Perspective on Conditional Asset Pricing," Journal of Banking and Finance forthcoming

Ferson, Wayne E. and Campbell R. Harvey, 1998b, ``Conditioning Variables and the Cross-Section of Stock Returns,"

Ferson, Wayne E. and Ravi Jagannathan, 1996, ``Econometric Evaluation of Asset Pricing Models" Working paper, University of Washington, Seattle, WA.

Ferson, Wayne E. and Rudi Schadt, 1996, "Measuring Fund Strategy and Performance in Changing Economic Conditions" Journal of Finance

Glodjo, Arman and Campbell R. Harvey, 1994, "Forecasting Foreign Exchange Market Returns via Entropy Based Coding: The Framework," Working paper, Fuqua School of Business.

Graham, John R. and Campbell R. Harvey, 1996, ``Market Timing Ability and Volatility Implied in Investment Newsletters' Asset Allocation Recommendations,'' Journal of Financial Economics (1996): 397-422.

Harvey, Campbell R., 1991a, "The World Price of Covariance Risk," Journal of Finance 46, 111-157.

Harvey, Campbell R. 1995a. ``Predictable Risk and Returns in Emerging Markets,'' Review of Financial Studies 773-816.

Harvey, Campbell R. 1995b, ``The Risk Exposure of Emerging Equity Markets,'' World Bank Economic Review 19-50.

Harvey, Campbell R. 1995c, ``Global Risk Exposure to a Trade-Weighted Currency Index,''

Harvey, Campbell R., 1995d, ``The Cross-Section of Volatility and Autocorrelation in Emerging Markets" Finanzmarkt und Portfolio Management 9 12-34.

Harvey, Campbell R., 1998, ``The International Cost of Capital and Risk Calculator,"

Harvey, Campbell R. and Akhtar Siddique, 1998a, ``Conditional Skewness in Asset Pricing Tests,''.

Harvey, Campbell R. and Akhtar Siddique, 1998b, ``Autoregressive Conditional Skewness,''.