Princeton University

Department of Economics
Economics 362
Financial Investments
Fall Term 2012-2013
Lectures !"# 10-10$0 Preceptors !att%e& 'aron
Location !c(os% $0 )o%n *im
Professor +arrison +on, Inessa Lis-ovic%
'en.%eim (enter for Finance 210 )ian,min /u
0ffice +ours !on.ay 3-1pm
Emails
+arrison +on, %%on,2princeton3e.u
!att%e& 'aron m.4aron2princeton3e.u
)eon,-+o 5)o%n6 *im 7-2Princeton3EDU
Inessa Lis-ovic% ilis-ovi2Princeton3EDU
)ian,min /u 7ian,min2Princeton3EDU
!y faculty assistant *aren 8eu-irc%en 5neu-irc%2princeton3e.u6 &ill %elp out &it%
lo,istical issues3 9%e sits on t%e secon. floor of t%e 'en.%eim (enter for Finance3
:e;uire. :ea.in,s
<vi 'o.ie= >le? *ane= an. >lan )3 !arcus 5'*!6= Investments= any recent e.ition=
Ir&in@!cAra&-+ill= 200B3 (opies also availa4le at Firestone :eserve3

:ea.in,s 4elo& &ill 4e poste. on 'lac-4oar.3
:ecommen.e. :ea.in,s
'urton A3 !al-iel 5!al-iel6= A Random Walk Down Wall Street= any recent e.ition=
paper4ac-= #3#3 8orton= 200C3
9%iller= :o4ert= Irrational Exuberance= 2
n.
e.ition paper4ac-= Princeton University
Press= 200$3
'ot% 4oo-s are availa4le for purc%ase at t%e University 9toreD copies also availa4le at
Firestone :eserve3
Econ 362 1
Ara.in,
T%e course ,ra.e &ill 4e 4ase. on precept participation 5inclu.in, pro4lem sets6= t%e
mi.-term e?am= an. t%e final e?am3
!i.-Term 30 percent
Precept 20 Percent
Final $0 percent
!a-eup (lasses
Fri.ays 10-10$0 am are reserve. as ma-e-up classes3
Econ 362 2
9c%e.ule
8o >r4itra,e !o.els
E@1C Intro.uction to (lass an. 8et Present Falue
:ea. a4out institutions= instruments an. mar-ets= '*! 1-$3
'*!= (%apters 1= 2= 3= 1= $
!al-iel= (%apters 1= 2= 3= 1= $
Pro4lem 9et 1 .ue at precept &ee- of E@21
E@1E= E@21 5Fri6= E@21 Derivative 9ecurities
'*!= (%apters 20= 21= 22
Pro4lem 9et 2 .ue on precept &ee- of 10@1
E@26 T%e 'on. !ar-et
'*!= (%apter 11
E@2B 5Fri6= 10@1 T%e Term 9tructure of Interest :ates
'*!= (%apters 1$= 16
Pro4lem 9et 3 .ue at precept &ee- of 10@B
:is--9%arin, !o.els
10@3= 10@B= 10@10 :is- >version an. Portfolio T%eory
G '*!= (%apters 6= C= B
G !al-iel= (%apter B
Pro4lem 9et 1= 1> .ue at precept &ee- of 10@1$
T%ere is no class on 10@1C3
10@1$ :evie&
10@22 !i.-term e?am in class
T%ere is no class on 10@213
#ee- of Fall :ecess
0cto4er 2E
Econ 362 3
11@$= 11@E 5Fri6 (apital >sset Pricin, !o.el
'*!= (%apters E
!al-iel= (%apter E
Pro4lem 9et $ .ue at precept &ee- of 11@12
T%ere is no class on 11@C3
11@12 >nalysis of Financial 9tatements
'*!= (%apter 1E
!errill Lync%= H+o& to :ea. a Financial :eportI 5'lac-4oar.6
Ara%am an. Do..= H>nalysis of t%e Income 9tatement=I (%apter
11 in Security Analysis= $
t%
e.3= !cAra&-+ill= 1EBB 5'lac-4oar.6
11@11 Use of Present Falue Tec%ni;ues in FinanceD Intrinsic-Falue
!et%o.s of 9toc- Faluation Tec%nical vs3 Fun.amental >nalysis
'*!= (%apter 1B
!al-iel= (%apter 6
Pro4lem 9et 6=C .ue at precept &ee- of 11@1E
9peculation !o.els
11@1E= 11@21 !ar-et Efficiency
'*!= (%apter 11
!al-iel= (%apters 6= C
9ummers= La&rence +3= 1EB$= H0n Economics an. Finance=I
Journal of Finance 10= 633-63$3 5'lac-4oar.
Pro4lem 9et B .ue at precept &ee- of 11@26
11@26= 11@2B Limits of >r4itra,e
'*!= (%apters 10= 12= 21
!al-iel (%apter 10
0&en >3 Lamont " :ic%ar. +3 T%aler= 20033 J(an t%e !ar-et
>.. an. 9u4tractK !ispricin, in Tec% 9toc- (arve-outs=J
Journal of Political Economy= University of (%ica,o Press= vol3
111526= pa,es 22C-26B= >pril3
Pro4lem 9et E .ue at precept &ee- 12@3
Econ 362 1
12@3 Lo& :is-= +i,% :eturn PuLLle
!alcolm 'a-er= 'ren.an 'ra.ley= an. )effrey #ur,ler=
'enc%mar-s as Limits to >r4itra,e Un.erstan.in, t%e Lo&
Folatility >nomaly= Financial Analysts Journal 6C= 8o3 1= 2011
5'lac-4oar.63
12@$= 12@10 9peculative 'etas
+arrison +on, an. )eremy 9tein= Disa,reement an. t%e 9toc-
!ar-et= Journal of Economic Persectives= 9prin, 20C= 10E-12B
5'lac-4oar.6
+arrison +on, an. Davi. 9raer= 9peculative 'etas= Princeton
University #or-in, Paper= 2011 5'lac-4oar.6
Pro4lem 9et 10 .ue at precept &ee- of 12@10
12@12 :evie&
T%ere &ill 4e a final e?am .urin, t%e e?amination perio.3
Econ 362 $