This module is not currently running in 2023 to 2024.
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.
Contact Hours: 30
Private Study: 120
Total Hours 150
This is a compulsory module for the:
* MSc Quantitative Finance and Econometrics
* MSc Economics and Econometrics
Main assessment methods:
Project 20%
Take Home Test 20%
Examination 60%
Reassessment Method: 100% Exam
Core reading
* Campbell, John, Lo, Andrew, and Craig MacKinlay. The econometrics of financial markets. 2nd Edition. Princeton University Press, 1997.
Recommended reading
* 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.
This list will be augmented by the articles from such journals as American Economic Review, Econometrica, Journal of Applied Econometrics, Journal of Econometrics, Journal of Political Economy, Quarterly Journal of Economics and Review of Economic Studies among others.
See the library reading list for this module (Canterbury)
On successfully completing the module students will be able to:
8.1 Comprehensively understand the role of financial markets in modern economies
8.2 Critically apply financial theories (including Efficient Market Hypothesis and Behavioural Finance) and reason at the high level of generality and abstraction
8.3 Learn novel advanced techniques to test different implications of financial complex theories using the real-world financial data
8.4 Identify and understand the new challenging and controversial issues in the financial markets
8.5 Critically analyse financial debates conducted in the media
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