Module FINN2031: Financial Econometrics 1

Department: Finance

FINN2031: Financial Econometrics 1

Prerequisites

• None

Corequisites

• None

Excluded Combination of Modules

• None

Aims

• To develop knowledge and understanding of key issues and concepts in Financial Econometrics.
• To equip students with the skills required to appreciate the applied literature in finance, to undertake an applied financial econometrics project and to prepare students for Financial Econometrics at higher levels.
• To offer the opportunity to develop key skills.

Content

• Review of Statistics: random variables, probability distributions and statistical inference.
• Simple linear regression model: OLS, its assumptions and properties (BLUE, GM Theorem, t-test, etc).
• Multiple regression model: assumptions, statistical inference (F-test), goodness of fit).
• A consideration of the breakdown of some of the OLS assumptions: autocorrelation, heteroscedasticity and model mis-specification.
• Simultaneous equation model and endogeneity: causes of endogeneity, 2SLS, IV, and Hausman test).
• Panel data analysis (within and between estimators, fixed effects, diff-in-diff, random effects).

Learning Outcomes

• Have knowledge and understanding of the key theoretical and practical issues in Financial Econometrics.
• Have knowledge of the underpinning mathematical construction of an econometric model.
• Have knowledge of the assumptions and how these assumptions drive the estimation and diagnostic testing of an econometric model.
• Have knowledge of how to obtain and manipulate data in preparation for an econometric analysis.

• Be able to apply econometric methods to the estimation of financial relationships and to interpret the results.
• Be able to undertake applied financial econometrics projects (estimating relationships using an econometric software package).
• Prepare students for the study of Financial Econometrics at higher levels.
• Critically evaluate contemporary literature that uses econometric techniques either covered in the module or proximate to those covered in the module.
• Evaluate the appropriateness of a particular econometric technique for a specific financial application.

• Written Communication - by completing the summative assignment.
• Planning, Organisation and Time Management.
• Problem Solving and Analysis - by applying the necessary analytical and quantitative skills to identify and empirically test theoretical relationships.
• Initiative - by collecting information for the summative assignment, searching relevant literature and information in preparation for the summative assignment.
• Numeracy - by applying an array of core mathematical-statistical skills;
• Computer Literacy and Information Retrieval - by word-processing the summative assignment and estimating relationships using an econometric software package.

Modes of Teaching, Learning and Assessment and how these contribute to the learning outcomes of the module

• Teaching is by lectures and computer classes. Learning takes place through attendance at lectures, preparation for and participation in computer classes, and private study. These allow students to develop the sub-specific knowledge, quantitative skills, and key transferable skills.
• Lectures provide an introduction to the key theoretical and empirical issues.
• Computer Classes introduce students to econometric software used in preparation for the summative assignment.
• Formative assessment is by means of weekly online tests. This ensures that students are consistently engaged with the module and receive regular feedback on their learning progress.
• The summative assessment is by means of an online In-Year Test, which will be taken during a specified 24-hour assessment window, and a written assignment. These provide students with opportunities to apply the necessary analytical and quantitative skills to identify and empirically test theoretical relationships in economics and finance.

Teaching Methods and Learning Hours

Summative Assessment

Formative Assessment:

Weekly online tests.

■ Students who do not attend monitored activities shown under Teaching Methods and Learning Hours, or who fail to complete the summative or formative assessment(s) specified above, may be subject to the Academic Progress procedures defined in the University's General Regulation V, and may be required to leave the University.