Module Identifier ECM1020  
Module Title EMPIRICAL METHODS IN FINANCE  
Academic Year 2005/2006  
Co-ordinator Mr Kobil Ruziev  
Semester Semester 2 (Taught over 2 semesters)  
Pre-Requisite Registered on the MSc Accounting and Finance  
Course delivery Seminars / Tutorials   1 seminars per week over semester 1 and 2  
  Lecture   1 lectures per week over semester 1 and 2  
Assessment
Assessment TypeAssessment Length/DetailsProportion
Semester Exam2 Hours  50%
Semester Assessment Assessed practical in Semester 1  20%
Semester Assessment Project in Semester 2  30%
Supplementary Exam2 Hours  50%
Supplementary Assessment Practical - 20%, Project - 30%50%

Learning outcomes

On completion of this module students should be able to: Critically evaluate (1) the use of classical linear regression in estimation and inference, (2) the consequences of the failure of the classical regression assumptions, their diagnosis, consequences and solutions, (3) the specification, estimation and properties of dynamic time series models, including those with dynamic error structures, (4) the specification, estimation and properties of simultaneous equation regression models, (5) the implications of unit roots in time series and the importance of cointegration, (6) the use single and multiple equation estimation techniques and (7) the advantages and shortcomings of panel data and the techniques for estimation of panel data models and their application.

Aims

The module is an advanced level study of econometrics. We will examine the uses of econometrics in the study of financial institutions and markets. Building from basic principles in finance and statistics we will discuss the practical application, both in the interpretation of empirical results in finance and the use of computers to estimate original models.

Brief description

The module will cover conceptual and practical material enabling students to both critically evaluate the empirical research of other authors and to conduct their own analyses. From essential foundations discussed in semester 1 the module progresses to an advanced level study of econometrics.

Content

SEMESTER 1
Introduction to CAPM and OLS
Regression analysis
Features of OLS and interpretation of results
Multicollinearity and Micronumerosity
Autocorrelation
Dynamic Models
Heteroscedasticity
Functional form and Normality
SEMESTER 2
Univariate Time Series Modelling
Multivariate modelling: Estimation of Simultaneous Equations Models
Modelling Long-run Financial Relationships: Unit Roots and Cointegration
Modelling Volatility in Financial Time Series
Models that combine cross-section and time-series data

Reading Lists

Books
Enders W. (1995) Applied Econometric Time Series Wiley
Gujarati D. (1995) Basic Econometrics 3rd edition. McGraw-Hill
Johnston, J. and J Dinardo (1997) Econometrics Methods 4th edition. McGraw-Hill

Notes

This module is at CQFW Level 7