75371 - Statistics of Financial Markets

Course Unit Page

SDGs

This teaching activity contributes to the achievement of the Sustainable Development Goals of the UN 2030 Agenda.

Quality education Decent work and economic growth

Academic Year 2018/2019

Learning outcomes

At the end of the course the student knows how data of the financial markets, equity indexes construction, measurement of return and risk of portfolios, techniques for the empirical estimation of the main trends in financial market prices both through analytical approach (smoothing and forecasting mean and variance) and graphical approach (technical analysis). The student is able to draw a trading strategy based on statistical confidence intervals or on probabilized – subjective – scenario.

Course contents

1.      Trend extraction (modelling)

·        Basic time series decomposition.

.       Trend extraction with Technical analysis (graphical approach and Moving Averages)

·       Trend extraction with statistical model: Deterministic an stochastic trends

 

2.     Trading strategies and trading algorithms

·        Basic elements of a trading strategy (probabilized scenarios through security analysis).

·        Active management techniques using statistical inference and technical analysis.

·        Chart patterns through trend's confidence intervals.

 

3.  Measuring (and benchmarking) trading performances:

·        Price index theory; the consumer price index, nominal vs real values

·        Main indexes for the Italian stock market

. Trading strategies (TS) evaluation

·        Forecasting errors

·        Cost Functions (CFs) in financial markets

                           i.      Quantitative CFs

                         ii.      Qualitative CFs 

                        iii.      Subjective CFs

·        Single TS evaluation

·        The comparisons of rival TS

                           i.      Descriptive approach

                         ii.      Inferential approach 

Readings/Bibliography

Diebold F.X. (2000) “Elements of Forecasting” South-Western ed. Cap 2, 4 e 12

On-line course material

Teaching methods

Teacher's lectures supplemented with smaller discussion sections,  tutorials, or laboratory sessions for testing statistical models ane building trading strategies.

Assessment methods

The final test aims to assess the achievement of the following learning objectives:

• in-depth knowledge of the statistical tools discussed during the lectures

• ability to use these tools to analyze the economic and financial phenomena

• ability to use the results in order to interpret the phenomenon under study and achieve decision-making processes.

The final test is oral, normally preceded by a written test containg both theoretical questions and exercices 

During the test is not allowed any materials such as textbooks, notes, computer media.

To take the exam you must pre-register on AlmaEsami

Those who do not succeed to enroll by the due date, are required to report promptly (and in any event before the official closing of the subscription lists) the problem to the Secretary's office. The teacher shall have the right to admit to the examinations.

It will be possible to inspect the test and ask for clarification at the date of verbalization

The possibility of using alternative hours of receipt to inspect the task is reserved for exceptional cases, with a valid reason.

The verbalization can occur in the absence of the student.

Teaching tools

Teacher's slides Computer sessions with Excel and Visual Trader

Office hours

See the website of Andrea Guizzardi