BE333-6-AU-CO:
Empirical Finance
2020/21
Essex Business School
Colchester Campus
Autumn
Undergraduate: Level 6
Current
Thursday 08 October 2020
Friday 18 December 2020
15
09 September 2020
Requisites for this module
BE314 or EC252
(none)
(none)
(none)
(none)
BSC N300 Finance,
BSC N301 Finance (Including Foundation Year),
BSC N302 Finance (Including Year Abroad),
BSC N304 Finance (Including Placement Year)
This module builds on the second-year module, BE314 Financial Modelling, to deepen students' understanding of linear and non-linear regression models. The emphasis is on times series modelling addressing the pitfalls of Ordinary Least Squares (OLS) and problems with data. Problems and issues frequently encountered in practice, such as non-linear data generating processes, heteroscedasticity, autocorrelation and unit roots are examined. In each case, we start off by defining the problem at hand, move on to how OLS results and prediction might be affected if the problem goes undetected, discuss the commonly employed tests for detection, and end with a discussion of corrective action. We further enrich our modelling skills by building univariate time series models aimed at both the mean and the volatility of the series at hand. The context is empirical in nature sourcing topics from the Empirical Finance literature. We make extensive use of econometric analysis software to run models with real financial data.
• To familiarise students with techniques for modelling financial data
• To build a bridge between financial theories and practice
• To introduce students to time series analysis with financial applications
On successful completion of the module, students will be able to:
• Set up an OLS model to estimate a linear relationship between a set of variables. Be able to interpret all items in an OLS output.
• Set up a multiple regression model and perform variable/ model selection.
• Work with non-linear but linearisable data generating processes and estimate models based on them.
• Describe in detail the problems such as heteroscedasticity and autocorrelation that have to be dealt with when performing OLS estimation. Be able to perform diagnostic tests and take corrective actions.
• Set up a time series model. Describe in detail how non-stationarity affects estimation. Be able to detect and correct for non-stationarity in the data.
• Understand the concept of non-stationarity (unit root processes) and cointegration and when to use the related estimation methods.
• Set up a time series volatility model (ARCH, GARCH, GJR, EGARCH).
• Achieve proficiency in econometric software.
Skills for Your Professional Life (Transferable Skills)
The module is geared towards building up or enhancing the following transferable skills:
* Proficiency in estimating econometric models.
* The ability to interpret in detail model output and write up research / technical reports on it.
* Make useful contributions at model-building stage within a team setting when dealing with econometric estimation.
* Ability to interpret the econometric results intuitively by relating them to the theoretical, institutional and policy framework of the financial firms/markets/organisations with a view to make statistical results plausible as well as appealing to investors, practitioners and policy makers.
Module Information
The student with the highest overall mark in the module will receive an award in the form of £150 worth of books from SAGE Publishing.
Note for students on the Applied Quantitative Methods (AQM) track:
A mark of 2.2 or above in BE333 is one of the requirements for qualifying for AQM.
Additionally, for students on this track with a summer placement, the coursework will entail use of data obtained during your placement. The lecturer will hold a meeting with AQM-track students prior to the start of summer placements where this topic will be discussed. It is imperative that you approach your summer placement with an eye towards obtaining suitable data from your employer.
Contact time consists of a two-hour lecture per week for ten weeks and a one-hour computer lab per week for nine weeks. Additional online support hours are scheduled for both the lecture and the labs sessions. Labs are absolutely essential for the learning process and the value added of this module. Students are expected to do the relevant reading and preparation before each lecture and lab.
In academic year 2020-2021 the delivery is likely to be different and involve online learning.
- Brooks, Chris. (2019) Introductory econometrics for finance, Cambridge: Cambridge University Press.
- Chris Brooks. (2019) Introductory econometrics for finance, New York, NY: Cambridge University Press.
The above list is indicative of the essential reading for the course. The library makes provision for all reading list items, with digital provision where possible, and these resources are shared between students. Further reading can be obtained from this module's reading list.
Assessment items, weightings and deadlines
| Coursework / exam |
Description |
Deadline |
Coursework weighting |
| Coursework |
Research Report 1 |
|
50% |
| Coursework |
Research Report 2 |
|
50% |
Exam format definitions
- Remote, open book: Your exam will take place remotely via an online learning platform. You may refer to any physical or electronic materials during the exam.
- In-person, open book: Your exam will take place on campus under invigilation. You may refer to any physical materials such as paper study notes or a textbook during the exam. Electronic devices may not be used in the exam.
- In-person, open book (restricted): The exam will take place on campus under invigilation. You may refer only to specific physical materials such as a named textbook during the exam. Permitted materials will be specified by your department. Electronic devices may not be used in the exam.
- In-person, closed book: The exam will take place on campus under invigilation. You may not refer to any physical materials or electronic devices during the exam. There may be times when a paper dictionary,
for example, may be permitted in an otherwise closed book exam. Any exceptions will be specified by your department.
Your department will provide further guidance before your exams.
Overall assessment
Reassessment
Module supervisor and teaching staff
Prof Ekaterini Panopoulou, email: a.panopoulou@essex.ac.uk.
Katerina Panopoulou & Christos Argyropoulos
ebsugcol@essex.ac.uk
Yes
Yes
No
Prof Christos Ioannidis
Aston University
Professor
Available via Moodle
Of 1692 hours, 0 (0%) hours available to students:
1692 hours not recorded due to service coverage or fault;
0 hours not recorded due to opt-out by lecturer(s).
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