Financial Econometrics

FIE401 Financial Econometrics

Autumn 2020

  • Topics

    This course introduces students to the main econometric methods and techniques. The course focuses on practical applications of econometrics to financial data using R (free programming language). The mathematics of econometrics is introduced only as needed and is not a central focus.

    Topics covered:

    • Introduction to R
    • Elements of statistics
    • Simple and multiple regression models
      • Possible application: CAPM and Fama-French three factor asset pricing models
    • Regression with a binary dependent variable
      • Possible application: Determinants of the choice of the mode of payment in M&As
    • Regression with panel data
      • Possible application: Capital structure regressions
    • Instrumental variables regression
      • Possible application: CEO succession decision in family firms
    • Quasi experiments
      • Possible application: Evaluation of macro-prudential policies such as loan-to-value cap for housing loans
    • Presentation of econometric analysis
      • Possible application: Master thesis or any report presenting econometric analysis

  • Learning outcome

    KNOWLEDGE - The candidate...

    • understands what assumptions econometric models are based on;
    • knows the econometric methods necessary for doing empirical analysis in finance;
    • is able to use R for doing econometric analysis.

    SKILLS - The candidate...

    • will be able to conduct, interpret and critically deal with empirical studies in finance and related fields;
    • will be able to identify the advantages and disadvantages of the various methods and techniques;
    • will be able to understand the relationships between the theoretical concepts taught in finance class and their application in empirical studies;

    COMPETENCE - The candidate...

    • has the tools and knowledge necessary to define, design and deliver an academically rigorous piece of research.

  • Teaching

    The course consists of a combination of pre-recorded lectures and lab sessions where students learn to use R for financial data analysis. In particular, every week the course offers... 

    • A pre-recorded  Video lecture : The student has to watch the video by him/herself. After being published, the video lectures will be available for the remaining time of the semester. 
    • A 3-hour lecture on-campus which consists of: 
      • 1 hour discussion of the Video lecture
      • 2 hours of lab session implementing econometric analysis in R

    Due to Covid-19 and the related restrictions, the 3-hour lecture will be streamed online. Real-time interaction between students participating remotely and the lecturer through means of chat, etc. will be possible and encouraged. However, the videos for the 3-hour lecture will be taken offline after two days. 

  • Restricted access

    None.  

  • Recommended prerequisites

    None.

  • Required prerequisites

    None.

  • Credit reduction due to overlap

    This course was taught before as FIE449 and FIE401A/B and cannot be combined with any of these courses.

    The course cannot be combined with BUS444 Økonometri for regnskap og økonomisk styring, BUS444E Econometrics for Business Research, BAN431 Econometrics and Statistical Programming, ECN402 Econometric Techniques.

  • Requirements for course approval

    Three assignments. Each team should have three to four members and hand in one solution per team. Assignments must be written in English and must be submitted in the same semester.

    Grading scale: Approved / Not Approved

  • Assessment

    The final grade has two components:

    1.    A three-day take-home exam in groups of three-four people. Grades can be repealed. (60%)

    2.    Subsequent presentation in groups of three-four people including a question and answer session. Grades are individual. Grades cannot be repealed. (40%)

     

    The exam can be held online in the exact same format, in case restrictions related to Covid-19 demand it.  

     

    The course is taught in English, hence the take-home exam as well as the subsequent presentation must be in English. In case a students wants to re-take the exam, both the oral and the written part have to be re-taken. 

     

    The three day take-home exam is held between 09:00 at the first day of examination and 14:00 on the third day of examination.

  • Grading Scale

    Grading scale A - F.

  • Computer tools

    Participants should bring their laptops to the all sessions. All applications covered in the course will be implemented in RStudio (an open-source software for R programming language). Download and installation instructions will be provided during the first lecture.

  • Literature

    Stock and Watson, Introduction to Econometrics, Global Edition, 4th edition

    Florian Heiss, Using R for Introductory Econometrics

Overview

ECTS Credits
7.5
Teaching language
English
Semester

Autumn and Spring. Offered Autumn 2020.

Note: This course description was formerly published with a disclaimer regarding potential changes to teaching methods, mandatory requirements and assessment. The course description has now been updated, and this is the final version.

Course responsible

Assistant Professor Darya Yuferova (Spring), Assistant Professor Maximilian Rohrer (Autumn), Department of Finance, NHH