Critically discuss one of the following asset pricing models:
Bad beta, good beta
Fama-French 3-factor model
Fama-French 5-factor model

Readings that you can start with:

Dimson, E., Mussavian, M., 1999. Three centuries of asset pricing. Journal of Banking & Finance 23 (12), pp. 1745-1769.

Fama, E. F., French, K. R., 1992. The Cross-Section of Expected Stock Returns. The Journal of Finance 47 (2), pp. 427-465.

Fama, E. F., French, K. R., 1996. Multifactor Explanations of Asset Pricing Anomalies. The Journal of Finance, 51: pp. 55-84.

Campbell, J., Vuolteenaho, T., 2003. Bad Beta, Good Beta. The American Economic Review 94 (5), pp. 1249-1275.

Cochrane, J. H., 2011. Presidential Address: Discount Rates. The Journal of Finance, pp. 1047-1108.

Campbell, R. H., Liu, Y., Zhu, F., 2016. … and the Cross-Section of Expected Returns. The Review of Financial Studies, pp. 5–68.

Fama, E. F., French, K. R., 2015. A five-factor asset pricing model. Journal of Financial Economics, 116(1), pp. 1-22.

Marking scheme
The essay will be marked on
The student’s understanding of the chosen model
The student’s apprehension of the theoretical underpinning, methodology, and empirical performance of the model discussed.
The student’s ability to critically comment on the model discussed.
The presentation of the article. The essay is basically a literature review. It should have clear thinking, clear point of view, focus on evidence, and be logical.


What to write in your coursework?
Questions you might want to think about while doing your coursework:
What is the larger research question?
What is the debate that forms the background for the article?
What are the approaches/proponents/findings involved in this debate?
What is the specific question the article addresses?
What is the data set?
Which method is used?
What are the core findings? How these findings contribute towards the existing literature?
What are the implications of the findings?
Are the findings compatible with findings in other papers where a similar research question is addressed? If not, why?
Is the database sufficient? Were appropriate controls in place?
Which points were criticised in later studies (use google scholar to find articles citing the article that you review)?
Could the results be interpreted in a different way?

You must not collaborate with others. The essay must be your individual work. All submitted essays will be checked for plagiarism.
The essay must not exceed a 2000-word limit. You must indicate the number of words at the end of the essay (excluding references).
The essay must be word processed with double spacing and font 12. It must be clearly referenced with a well formatted bibliography. Spelling must be checked. The presentation of the essay will be taken into account when marking.
You are advised to start with a brief introduction of the CAPM model and its theoretical contribution and focus on its limitations and challenges and how researchers trying to address the challenges and to improve the asset pricing model.
An equation editor must be used to type equations.
The bibliography should contain only those sources you have referenced in your assignment. This does not mean that you should include all books/journals/internet sites you have read to research your assignment.
You must make sure you reference your resources in a proper way to avoid plagiarism. See for more information regarding referencing.
Do not use direct quotation of long passages; limit it to one or two sentences. To avoid plagiarism, you should always use quotation marks for direct quotation.
Referencing in your assignment should take the following forms:

The structural approach of Gilbert (1989) demonstrated that two demand side variables…..

The behaviour of primary commodity prices is particularly important to many developing countries where a significant proportion of national income is generated by a small number of primary products (see Cashin et al., 2000).

A good explanation of the concept of cointegration can be found in Engle and Granger (1991).

These would be listed in the bibliography is follows:

Cashin, P., Liang, H. and C. McDermott (2000) How persistent are shocks to world commodity prices?, IMF Staff Papers, 47, 177-217.

Engle, R.F. and C.W.J. Granger (1991) Long-run economic relationships: readings in cointegration, Oxford University Press, Oxford.

Gilbert, C.L. (1989) The impact of exchange rates and developing country debt on commodity prices, Economic Journal, 99, 773-84.

Note: The first and the third references are journal articles and the second is a book.