37269 - Econometrics of Financial Markets

Learning outcomes

At the end of the course the student is able to develop the econometric analysis of the class of present value models used in financial econometrics, using stationary and/or non-stationary Vector Autoregressive systems as statistical platforms upon which all theoretical restrictions are nested and tested.

Course contents

1. Introduction.
2. A brief overview of models for univariate stationary time series.
3. VAR models: Representation and forecast; Estimation and inference; OLS estimation; ML estimation; Linear constrained estimation; Testing linear restrictions; Tests for Granger causality.
4. Stationary and non-stationary time series: Testing for unit-roots.
5. Spurious regression and cointegration.
6. VAR and cointegration.
7. Structural VAR models: Cholesky and other identification schemes.
8. Impulse response functions and Forecast Error Variance Decomposition.
   

Readings/Bibliography

Suggested literature

Books:

- Introductory Econometrics for Finance - Chris Brooks

- A Guide to Modern Econometrics - Marno Verbeek

Notes:

- Time Series for Macroeconomics and Finance - John Cochrane

- Econometrics - Bruce Hansen

Papers:

- Structural Vector Autoregressions - Lutz Kilian

 

Teaching methods

Classes, labs with empirical applications and discussions.

Assessment methods

The exam is different for attending and non-attending students. For attending students it will be represented by an empirical assessment to deliver to the instructor just after the course. For non-attending students it will be made of a more traditional theoretical written exam. The exam will consists of four very general questions. Students can organize their responses in 90 minutes, without necessarily following a precise scheme, but they must satisfy the mothodological rigour characterizing the discipline.  

In case online exams will be envisaged by the University of Bologna, the structure of the written exam remains the same. The exam will be run through Zoom and Exams Online (EOL). Detailed instructions on how to manage and hand in the online exam are available on the course page on the VIRTUALE platform.

The maximum possible score is 30 cum laude, in case all anwers are correct, complete and formally rigorous.

The grade is graduated as follows:

<18: failed
18-23: sufficient
24-27: good
28-30: very good
30 e lode excellent

Teaching tools

-slides

-software: Gretl

-data: FRED dataset

Office hours

See the website of Emanuele Bacchiocchi