Empirical Finance

Below, you find teaching material for my Empirical Finance modules at Cambridge Real Estate & Finance Seminar.

Module 1: Experimental Finance (The experimental stock market)

The aim of this classroom experiment is to introduce students to the research method of controlled online experiments and deepen their practical understanding of stock markets.

Module 2: Empirical Finance (Exchange rate theories)

“A weak currency, despite its appeal to exporters and politicians, is no free lunch. But it can provide a cheap one. In China, for example, a McDonald’s Big Mac costs just 14.5 yuan on average in Beijing and Shenzhen, the equivalent of $2.18 at market exchange rates. In America, in contrast, the same burger averages $3.71. That makes China’s yuan one of the most undervalued currencies in the Big Mac index.” – The Economist, Oct 14th 2010

The news-magazine The Economist regularly publishes data on the so called Big Mac index and exchange rates between countries. We will explore the data for 45 countries from the July 16, 2009 issue.

Class preparation:

Have a look at “An indigestible problem: Why China needs more expensive burgers”, The Economist, Oct 14th 2010, available at http://www.economist.com.

Please also make sure you bring your laptop, and install the free statistics software R from http://www.r-project.org.