BAMS 580C - World Stock Markets: Anomalies and Behavioral Finance
Professor William T. Ziemba
SauderSchool of Business
MBA Period 5
September 4 - October 12, 2003Time: 10:30-12:30 / Office Hours: Tu/Th 9:30-10:30 am, 2:30-3:300 pm and by appointment, HA 559
Room: --- / phone 822-8382, 261-1343 (H), fax 263-9572
The materials for the course are in the course package of research papers and slides and in parts of the following seven books which are on reserve in the David Lam Commerce Library
[KZ] D.B. Keim and W.T. Ziemba, eds (2000) Security Market Imperfections in Worldwide Equity Markets, Cambridge University Press
[JS] J. Seigel (2003) Stocks for the Long Run, 3rd Edition, McGraw-Hill, NY
[AS] A. Shleifer (2000) Inefficient markets: an introduction to behavorial finance, Oxford University Press
[S] R. Shiller (2000) Irrational Exuberance, PrincetonUniversity Press
[DMS] E. Dimson, P. Marsh and M. Staunton (2002) Triumph of the optimist, Princeton University Press
[M] J. Montier (2002) Behavioural finance, Wiley.
[Z]W.T. Ziemba (2003) The stochastic programming approach to asset, liability and wealth management, AIMR, Chapter 3 only.
The course requirements are:
- a 30 minute group presentation of one of the papers labelled student presentation; for which you will make slides or a power point presentation to show the class and copy them for the other students
- a take home final exam, which will have a choice of questions
You do not have to read all the extensive course listings. We will only cover topics that interest us in the lectures and student presentations. We will not do all the student presentations listed. Many topics are listed to provide choice.
Instructor:William T Ziemba, Alumni Professor of Financial Modeling and Stochastic Optimization at UBC has been working on financial market research as discussed in this course for many years. He has been a consultant to the Frank Russell Company, one of the leaders in the use of such models and the advisor on some $1 trillion of assets. The class will discuss some of this experience. Besides teaching at UBC, he has taught in finance and management science at Berkeley, UCLA, Stanford, London School of Economics, ImperialCollege, University of Tsukuba in Japan, the University of Chicago, Helsinki School of Economics, OxfordUniversity and the University of Zurich.
Overview of the course/Background reference material [background not required]
Preface (xiii-xiv) and Security market imperfections: an overview by Keim and Ziemba (xv-xxvii) in KZ
Worldwide security market regularities by Ziemba, European Journal of Operational Research, 1994
The judgment of economic science on rational portfolio management: indexing, timing and long horizon effects by Samuelson, Journal of Portfolio Management, 1989
Week 1:Historical returns from assets around the world
Slides, powerpoint presentation and Handouts by Ziemba of current stock market information and events, tracing the world’s markets from 1800 to 2003
Slides from JS and DMS
Global stock markets in the twentieth century by Jorion and Goetzmann, Journal of Finance, 1999
Efficient capital markets II by Fama, Journal of Finance, 1991
Are financial markets efficient? Chapter 1 of AS
Student presentation:Psychological foundations, Chapter 1 of M
Slides: How does Clinton stand up to history: US stock market returns and presidential party affiliations, 1928-97 by Ziemba and paper with the same title by Hensel and Ziemba in KZ, 203-217 plus updates for 2003
Week 2:Fundamentals and stock returns. Factor models, internet stocks and trading
Slides:Predicting returns on the Tokyo stock exchange, based on paper with same title by Schwartz and Ziemba in KZ, 492-511
The cross section of common stock returns: a review of the evidence and some new findings by Hawawini and Keim in KZ, 3-43
Student presentation:Beta and book to market: is the glass half full or half empty? By Kothari and Shanken in KZ, 44-64
Student presentation:Stock prices and fundamentals by Heaton and Lucas, mimeo, 1999
Student presentation: The closed-end fund puzzle: a literature review by Minio-Paluello in KZ, 247-275 and The closed end fund puzzle, Chapter 3 in AS
Student presentation: Characteristics-based premia in emerging markets: sector neutrality, cycles and cross market correlation by Patel in KZ, 416-432
Student presentation:Rational pricing of internet companies by Schwartz and Moon, Financial Analysts Journal, 2001
Student presentation:Online investors: do the slow die first? By Barber and Odean, 1999
Student presentation:Noise trader risk in financial markets, Chapter 2 of AS
Student presentation:Positive feedback investment strategies, Chapter 6 of AS
Student presentation:Do investors trade too much? by Odean, Journal of Finance, 1999, and
Trading is hazardous to your wealth: the common stock investment performance of individual invstors by Barber and Odean, 1999, Journal of Finance, 2001.
Week 3:Seasonality in stock returns
Slides: The use of time series regularities in portfolio management by Ziemba
Slides:High stock returns before holidays and paper high stock returns before holidays: international evidence and additional tests by Correra and Keim in KZ, 512-531
Slides:The turn of the month effect by Ziemba and paper A long term examination of the turn-of-the-month effect in the S&P500 by Hensel, Sick and Ziemba in KZ 218-246
The turn-of-the-month effect in the US stock index futures markets, 1982-1992 by Hensel, Sick and Ziemba, Review of Futures Markets, 1994, comments by Maberly
Student presentation: Canadian security market anomalies by Athanassakos and Foerster in KZ, 297-336
Student presentation:Seasonal anomalies in the Italian stock market, 1973-1993 by Canestrelli and Ziemba in KZ, 337-363
Student presentation:Security market anomalies in Finland by Martikainen in KZ, 390-415
Student presentation: Losing sleep at the market: the daylight-savings anomaly by Kamstra, Kramer and Levi, American Economic Review, 2001
Week 4:January and size effects
Slides: Anticipation of the January small firm effect in the US futures markets by Ziemba and paper with same title by Hensel and Ziemba in KZ, 179-202 plus earlier papers
Investing in the turn-of-the-year effect in the US futures markets by Ziemba in Interfaces, 1994
Playing the turn-of-the-year effect with index futures by Clark and Ziemba in Operations Research, 1987
Student presentation:Is there still a January effect? By Booth and Keim in KZ, 169-178
Student presentation:UK financial market returns, 1955-2000, By Dimson and Marsh, Journal of Business, 2001
Student presentation:Winter blues: seasonal affective disorder (SAD), the January effect and the stock market by Kamstra, Kramer and Levi, 2000
Week 5:Stock market crashes. Timing of returns. Nikkei put warrant risk arbitrage. Japanese financial markets.
Slides:A bond and stock yield risk indicator for stock market declines plus paper by Berge and Ziemba
Slides: Risk arbitrage in the Nikkei put warrant market of 1989-90 by Ziemba and paper with same title by Shaw, Thorp and Ziemba, Applied Mathematical Finance, 1995
Student presentation:A model of investor sentiment, Chapter of AS
Student presentation:Land and stock prices in Japan by Stone and Ziemba, Journal of Economic Perspectives, 1993 plus slides of Stone and Ziemba
Student presentation:Japanese security market regularities, 1990-1994 by Comolli and Ziemba in KZ, 458-491
Student presentation:Boys will be boys: gender, over-confidence and common stock investment by Barber and Odean, 1999.
Student presentation:Do extreme falls help forecasting stock returns? Evidence from world markets by Basci, Basci and Muradoglu, 2000.
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