Financial Econometrics - EC843

Location Term Level Credits (ECTS) Current Convenor 2019-20
Canterbury Spring
View Timetable
7 15 (7.5)

Pre-requisites

EC821 Econometric Methods
EC822 Foundations of Financial Economics

Restrictions

None

2019-20

Overview

The module offers rigorous treatment of advanced methods in modern financial econometrics. Giving equal attention to theory and empirical practice it provides students with essential knowledge indispensable for financial market professionals working in analytics departments. The module starts with the overview of core concepts of time series analysis. It proceeds with specifying, estimating and testing a range of asset pricing models including Stochastic Discount Factor Based Asset Pricing, The Capital Asset Pricing Model, and Factor Pricing Regressions. Next, the module addresses the analysis of returns predictability, both in the single regression framework and in the multivariate setting. Here we also provide careful modelling of volatility effects of the market data (e.g. by using asymmetric GARCH), and market interdependence. Special attention is paid to small sample biases and identification issues.

Details

Contact hours

30 hours of academic teaching in the form of lectures and seminars

Method of assessment

20% Project (2,000 words)
20% In-Course Test (60 minutes)
60% Examination (2 hours)

Indicative reading

• Campbell, John, Lo, Andrew, and Craig MacKinlay. The econometrics of financial markets. 2nd Edition. Princeton University Press, 1997
• Campbell, John. Financial Decisions and Markets: A Course in Asset Pricing. Princeton University Press, 2017
• Cochrane, John. Asset Pricing. (Revised Edition). Princeton University Press, 2009
• Duffie, Darrell. Dynamic asset pricing theory. 3rd Edition. Princeton University Press, 2001
• Lo, Andrew. Adaptive Markets: Financial Evolution at the Speed of Thought. Princeton University Press, 2017
• Lütkepohl, Helmut. New introduction to multiple time series analysis. Springer, 2005

See the library reading list for this module (Canterbury)

Learning outcomes

On successfully completing the module students will be able to:

• comprehensively understand the role of financial markets in modern economies
• critically apply financial theories (including Efficient Market Hypothesis and Behavioural Finance) and reason at the high level of generality and abstraction
• learn novel advanced techniques to test different implications of financial complex theories using the real-world financial data
• identify and understand the new challenging and controversial issues in the financial markets
• critically analyse financial debates conducted in the media
• retrieve information from a variety of data sources using modern computing and data access resources
• critically use information to support their understanding of complex and contradictory economic and/or financial issues
• proficiently communicate and present sophisticated economic and/or financial ideas through short articles and formal reports

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