This course represents an intermediate level course, concentrating on the application of econometrics in the study of financial and economic data – especially
stock returns,
interest rates and
exchange rates.
Knowledge of basic statistics is required.
The required textbooks,
Newbold, Carlson and Thorne, Statistics for Business and Economics (STAT), last Edition, Prentice-Hall, is available at the Boğaziçi bookstore.
Chris Brooks (CB), Introductory Econometrics for Finance, Cambridge University Press, last edition, is available at the Boğaziçi Bookstore. Assigned readings should be completed prior to the class meeting.
You are strongly encouraged to use Eviews and Excel to reproduce the results of various examples and applications discussed in this book.
Camphell, Lo, MacKinlay, 1997, The Econometrics of Financial Markets, Princeton University press (CLM)
Griffiths, Hill and Judge, 1993, Learning and Practicing Econometrics. Wiley and Sons (LEARN)
H. Russell Fogler and Sundaram Ganapathy, Financial Econometrics (FINE)
Walter Enders, Applied Econometric Time Series, John Wiley & Sons, last edition (SER)
Basic statistical concepts and tools needed for business applications. The topics covered are:
(i) Data and Statistics
(ii) Probability; (iii)
Sampling Theory;
(iv) Stationary Time Series;
(v) Linear Regression;
Introduction
- Introduction to financial data and tools and analysis ;(CB, Chapter 1,2)
Classical Linear Regression
- Classical Linear Regression and assumptions; (CB, Chapter 3)
Classical Linear Regression (continued) –; (CB, Chapter 4)
ARMA Modeling*;*(CB, Chapter 5)
-Univariate times series modeling and Box Jenkins Approach
-Additional Reading will be available at the class web pages
Multivariate Time Series Models - *¸*(CB, Chapter 6)
- Multivariate Time Series Modeling (VAR, impulse response, variance decomposition)
-Additional Reading will be available at the class web pages
Modeling Long-Run Relationship - *¸*(CB, Chapter 7)
-Stationarity, unit root testing, cointegration, error correction
-Additional Reading will be available at the class web pages
Volatility -(CB, Chapter 8)
-Introduction to the theory and practice of GARCH models
-Lecture notes and additional reading will be available at the class web pages
Volatility and Value-at-Risk –
-Deeper discussion of GARCH models including Value-at-Risk
-Lecture notes and additional reading will be available at the class web pages
9.Switching Models (CB, Chapter 8)
-Seasonality, Markov switching, threshold autoregression
-Additional Reading will be available at the class web pages