69830 - Financial Econometrics A.C.

Course Unit Page

  • Teacher Luca Fanelli

  • Credits 10

  • SSD SECS-P/05

  • Teaching Mode Traditional lectures

  • Language Italian

  • Campus of Rimini

  • Degree Programme Second cycle degree programme (LM) in Statistical, Financial and Actuarial Sciences (cod. 8877)

  • Teaching resources on Virtuale

  • Course Timetable from Feb 14, 2022 to May 19, 2022

SDGs

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

Quality education Gender equality Decent work and economic growth Climate Action

Academic Year 2021/2022

Learning outcomes

At the end of the course the student deals with the economeric analysis of the main models of asset pricing and the univariate amd multivariate time-series models typically used in finance.
The use of econometric packages and applied work is encouraged.

Course contents

The course is divided into two parts.

Part one. Solid background in econometric: from OLS to IV regressions and GMM estimation of main asset price models.

Part two. Basic facts about risk measures based on conditional volatility models.

 

Part one.

Quick resumè: the classic and generalized linear regression model and their efficient estimation; hypotheses tests; diagnostic analysis.

From OLS regressions to instrumental variables (IV) methods.

GMM estimation: the econometric analysis of Present Value models and the C-CAPM.

 

Part two.

1. Scopes

(a) Prices and returns of financial assets: definitions
(b) Three stylized facts about asset returns
(c) Which time series models of asset returns ?

2. Background & Useful things (Slides 2)
(a) Basic properties of random sequences
(b) Stationary time series, the Weak Law of Large Numbers and the Central Limit Theorem

(c) Algebra of expectations and Martingale Difference Sequences

3. AR, MA, ARMA time series models

4. ARCH and GARCH time series models and their use in
quantitative finance.

Readings/Bibliography

Teaching material is provided by the teachar in form of slides. The student can further refer to the following books:

CAMPBELL, J.Y., LO, A.W., MacKINLAY (1997), The econometrics of financial markets, Princeton University Press.

TSAY (2002) Analysis of Financial Time Series, Wiley.

Verbeek, M. (2000), Modern Econometrics, Wiley.

Palomba, G. (2010), Elementi di statistica per l'econometria", Clua Ancona. This text is recommended for students who do not posses a "complete" background in econometrics.

Teaching methods

Theoretical lessons and empirical case studies in the lab.

Assessment methods

The ultimate goal of the exam is to verify that the students have achieved the following objectives:

• the knowledge of basic econometric models and their application to the special features which characterize financial markets;

• the knowledge of OLS, GLS and IV estimators, their properties and application fields;

• the knowledge of main time-series models of the ARIMA class, especially their use for forecasting purposes;

• the knowledge of the class of ARCH and GARCH models, their use to dynamic risk evaluation and for forecasting purposes.

The exam is written and a final grade like xx/30 is given.

Students are supposed to both theoretical and practical exercises. Real cases can be also discussed.

 


Teaching tools

Theory and empirical practise in the lab

Office hours

See the website of Luca Fanelli