Applied Financial Econmetrics

DESCRIPTION:
This is a basic course for financial economics and econometrics. In this course, empirical analyses of the economics and econometrics of financial assets will be provided. Specifically, the properties of financial asset returns, empirical tests of asset-pricing models, univariate and multivariate models as well as volatility models, among other topics, will be explored. The course will focus on economic intuition and practical applications of several econometric methods that are widely employed in financial research. Thus, the course will combine theory and practice in an effort to provide the student with the necessary tools and knowledge to apply to real-world situations such as investment portfolio management, risk management, financial services and so on.

RATIONALE: 
The development of quantitative methods in finance is quite recent and has been paralleled by the fast expansion of financial markets and increasing variety of financial products. Given the importance of quantitative analysis in finance, this course develops students' ability to quantify and evaluate finance theories using actual examples of empirical finance.

LEARNING OUTCOMES: 
As a result of taking this module, the student should be able to:
1. Estimate the regression model, apply diagnostic tests and test hypotheses regarding the estimated parameters
2. Demonstrate knowledge of univariate modelling (AR, MA, ARMA) methodologies and use them for the purpose of forecasting.
3. Demonstrate understanding of multivariate modelling techniques such as simultaneous equations, VAR/VEC specifications as well as causality models.
4. Explain the concept of cointegration and error-correction mechanism, interpret the results of cointegration tests and estimate error-correction models.
5. Estimate autoregressive conditional heteroskedastic (ARCH) specifications and some of its variants.

METHOD OF TEACHING AND LEARNING:
In congruence with the teaching and learning strategy of the college, the following tools are used:
1. In-class exercises and actual examples of empirical finance that help lecturer to illustrate the basic concepts of the course.
2. In-class discussion of journal articles to expand exposure on course content beyond the textbook and generate discussion on financial issues.
3. Use of power point to present the material.
4. Self-study in computer class (doing practical work using financial data sets)