Essex Business School
Undergraduate: Level 6
Thursday 05 October 2023
Friday 28 June 2024
23 June 2023
Requisites for this module
BSC N390JS Banking and Finance,
BSC N390NS Banking and Finance
This module builds on the second-year module, BE314 Financial Modelling, to deepen students' understanding of linear and non-linear regression models.
The aims of this module are:
- 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.
By the end of this module, students will be expected to 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 co-integration and when to use the related estimation methods.
- Set up a time series volatility model (ARCH, GARCH, GJR, EGARCH).
- Achieve proficiency in Eviews.
Skills for your professional life (Transferable Skills)
This module is geared towards building up or enhancing the following transferable skills:
- Proficiency in estimating econometric models using Eviews.
- 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 policymakers.
The emphasis of this module 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 Eviews to run models with real financial data.
This module will be delivered via:
- One 2-hour lecture per week.
- One 1-hour computer lab per week.
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.
This module does not appear to have a published bibliography for this year.
Assessment items, weightings and deadlines
|Coursework / exam
|Reassessment Main exam: Remote, Open Book, 120 minutes during September (Reassessment Period)
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.
Module supervisor and teaching staff
No external examiner information available for this module.
Available via Moodle
No lecture recording information available for this module.
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