Michael R. Gibbons

Michael R. Gibbons
  • I.W. Burnham II Professor of Investment Banking

Contact Information

  • office Address:

    1000 Steinberg-Dietrich Hall
    3620 Locust Walk
    Philadelphia, PA 19104

Research Interests: asset pricing, econometrics, portfolio theory



PhD, University of Chicago, 1980; MS, University of Chicago, 1979; BS, Butler University, 1975

Recent Consulting

Consulting ranges from expert testimony (involving valuation of assets) to issues which arise in professional investment management

Career and Recent Professional Awards; Teaching Awards

Batterymarch Fellow, 1983-84; Graduate Division Excellence in Teaching Award, 1996, 2001

Academic Positions Held

Wharton: 1989-present (Deputy Dean, 2007-2021; Chairperson, Finance Department,1994-2006; named I.W. Burnham II Professor of Investment Banking, 1989). Previous appointments: Stanford University; University of Chicago. Visiting appointment: University of Chicago

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  • Michael R. Gibbons (1993), A Test of the Cox, Ingersoll, and Ross Model of the Term Structure, Review of Financial Studies, 6 (1993).

    Abstract: We test the theory of the term structure of indexed-bond prices due to Cox, Ingersoll, and Ross (CIR). The econometric method uses Hansen's generalized method of moments and exploits the probability distribution of the single-state variable in CIR's model, thus avoiding the use of aggregate consumption data. It enables us to estimate a continuous-time model based on discretely sampled data. The tests indicate that CIR's model for index bonds performs reasonably well when confronted with short-term Treasury-bill returns. The estimates indicate that term premiums are positive and that yield curves can take several shapes. However, the fitted model does poorly in explaining the serial correlation in real Treasury-bill returns.

  • Michael R. Gibbons (1989), Empirical Tests of the Consumption-Oriented CAPM, Journal of Finance, 44 (1989).

    Abstract: The empirical implications of the consumption-oriented capital asset pricing model (CCAPM) are examined, and its performance is compared with a model based on the market portfolio. The CCAPM is estimated after adjusting for measurement problems associated with reported consumption data. The CCAPM is tested using betas based on both consumption and the portfolio having the maximum correlation with consumption. As predicted by the CCAPM, the market price of risk is significantly positive, and the estimate of the real interest rate is close to zero. The performances of the traditional CAPM and the CCAPM are about the same.

  • Michael R. Gibbons (1989), A Test of the Efficiency of a Given Portfolio, Econometrics, 57 (1989).


Past Courses


    The Senior Capstone Project is required for all BAS degree students, in lieu of the senior design course. The Capstone Project provides an opportunity for the student to apply the theoretical ideas and tools learned from other courses. The project is usually applied, rather than theoretical, exercise, and should focus on a real world problem related to the career goals of the student. The one-semester project may be completed in either the fall or sprong term of the senior year, and must be done under the supervision of a sponsoring faculty member. To register for this course, the student must submit a detailed proposal, signed by the supervising professor, and the student's faculty advisor, to the Office of Academic Programs two weeks prior to the start of the term.


    This course studies the concepts and evidence relevant to the management of investment portfolios. Topics include diversification, asset allocation, portfolio optimization, factor models, the relation between risk and return, trading, passive (e.g., index-fund) and active (e.g., hedge-fund, long-short) strategies, mutual funds, performance evaluation, long-horizon investing and simulation. The course deals very little with individual security valuation and discretionary investing (i.e., "equity research" or "stock picking"). In addition to course prerequisites, STAT 102 may be taken concurrently.


    Integrates the work of the various courses and familiarizes the student with the tools and techniques of research.


    This course covers one of the most exciting and fundamental areas in finance. Financial derivatives serve as building blocks to understand broad classes of financial problems, such as complex asset portfolios, strategic corporate decisions, and stages in venture capital investing. The main objective of this course is build intuition and skills on (1) pricing and hedging of derivative securities, and (2) using them for investment and risk management. In terms of methodologies, we apply the non-arbitrage principle and the law of one price to dynamic models through three different approaches: the binomial tree model, the Black-Scholes-Merton option pricing model, and the simulation-based risk neutral pricing approach. The course covers a wide range of applications, including the use of derivatives in asset management, the valuation of corporate securities such as stocks and corporate bonds with embedded options, interest rate and credit derivatives, as well as crude oil derivatives. We emphasize practical considerations of implementing strategies using derivatives as tools, especially when no-arbitrage conditions do not hold.


    This course covers fixed income securities (including fixed income derivatives) and provides an introduction to the markets in which they are traded, as well as to the tools that are used to value these securities and to assess and manage their risk. Quantitative models play a key role in the valuation and risk management of these securities. In addition to course prerequisites, FNCE 613 is recommended but not required.


    Independent Study Projects require extensive independent work and a considerable amount of writing. ISP in Finance are intended to give students the opportunity to study a particular topic in Finance in greater depth than is covered in the curriculum. The application for ISP's should outline a plan of study that requires at least as much work as a typical course in the Finance Department that meets twice a week. Applications for FNCE 899 ISP's will not be accepted after the THIRD WEEK OF THE SEMESTER. ISP's must be supervised by a Standing Faculty member of the Finance Department.

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