PRINCIPLES OF FINANCE

Description

During the last 40 years, the financial services sector has grown enormously. This growth is apparent whether one measures the financial sector by its share of GDP, by the quantity of financial assets, by employment, or by average wages. By 2020 the financial services sector contributed 16 percent to the world GDP, compared to less than 5 percent in 1980 and about 2 percent in 1950. Workers in the financial sector have benefitted impressively from this growth: in 1980, the typical financial services employees earned about the same wages as their counterpart in other industries; by 2017, employees in financial services earned on average twice as much. Attracted by high wages, graduates of elite universities flock into the financial services industry. But how does finance create so much value for society? The course mission is to analyze the main principles of finance, namely: Valuation and Capital Allocation; Risk, Return, and Diversification; Market Efficiency and Behavioral Finance; and Financial Structure: Equity and Debt. · Valuation of Stock and Bonds · Capital Budgeting · Asset Prices and Asset Returns · Mean-Variance Analysis and Portfolio Diversification · Equilibrium in Financial Markets: The Capital Asset Pricing Model (CAPM) · Market Efficiency and Behavioral Finance: Definitions and Empirical Tests · Financial Structure and the Value of the Firm · Options · Finance and AI Exchange/course-load context: The official incoming exchange catalogue states that 30xxx codes refer to undergraduate courses, 20xxx and 21xxx codes refer to graduate courses, and 50xxx codes refer to the Integrated Master of Arts in Law. Undergraduate exchange students are allowed to select undergraduate-level courses only; graduate students can choose both undergraduate and graduate level courses. Bocconi credits are ECTS-equivalent. Each Bocconi credit corresponds to 25 hours of workload, including 8 lecture hours.