Financial Econometrics

FIN538 Financial Econometrics

Autumn 2021

  • Topics

    The goal of the course is to cover econometrics methods widely used in asset pricing and corporate finance with a particular emphasis on intuition and empirical applications.

    Topics covered:

    • Introduction to R
    • Basic Econometrics
      • Ordinary Least Squares
      • Maximum Likelihood
      • Generalized Method of Moments
    • Cross-section of stock returns (CAPM, multifactor models, Arbitrage Pricing Theory (APT))
      • Black, Jensen and Scholes (1972) approach
      • Fama MacBeth (1973) approach
      • Principal Component Analysis
    • Time series of stock returns (Efficient Market Hypothesis, volatility and correlation modelling)
      • Event studies
      • Vector-autoregressions
      • ARCH/GARCH/DCC models
    • Choice modelling
      • Logit/probit models
      • Ordered logit/probit
      • Multinomial logit/probit
    • Causality
      • Panel data
      • Instrumental variables
      • Natural experiments

  • Learning outcome

    After completion of the course, the student's will be able to:

    Knowledge

    • Assess the common empirical research methods in finance
    • Explain methods for testing asset pricing models
    • Explain methods used in corporate finance, time series analysis and choice theory.

    Skills

    • Implement the common empirical methods in finance using R.
    • Replicate analysis in state-of-the art empirical finance papers.

    Competence

    • Will be able to conduct, interpret and critically deal with empirical studies in finance.
    • Has the tools and knowledge necessary to define, design and deliver the results of empirical investigations as done in academic articles.

  • Teaching

    Lecture based course.

    If necessary, depending on the Corona situation the course will be digital.

  • Restricted access

    PhD candidates from NHH as well as PhD candidates from other institutions can take part in the course.

    Course participation of employees in working life or motivated master's students at NHH is subject to the approval from the course responsible on case by case basis.

    There is no cap on the amount of students.

  • Recommended prerequisites

    Advanced master-level courses such as asset pricing, investment, corporate finance, and econometrics. Preferably: course in linear algebra.

  • Credit reduction due to overlap

    The course cannot be combined with ECS503 Advanced Econometrics.

  • Assessment

    The course grade is based on hand-ins to five problem sets. The hand-ins are on an individual basis. 

    Problem set 1: 15%

    Problem set 2: 15%

    Problem set 3: 20%

    Problem set 4: 20%

    Problem set 5: 30%

  • Grading Scale

    A - F.

  • Computer tools

    R/ RStudio

  • Literature

    Lecture slides and academic papers

    Optional:

    Greene, Econometric Analysis, 8th Global Edition, 2019

    Wayne Ferson. Empirical Asset Pricing 2019, MIT Press.

    John Campbell. Financial Decisions and Markets. 2018. Princeton Univ Press.

    Angrist and Pischke, Mostly Harmless Econometrics: An Empiricist's Companion, 2009

Overview

ECTS Credits
7.5
Teaching language
English
Semester

Autumn. Offered autumn 2021.

Course responsible

Adjunct Professor Bernt-Arne Ødegaard (main responsible), Department of Finance, NHH.

Adjunct Professor Eric de Bodt, Department of Finance, NHH