Excerpt from course description

Financial Econometrics

Introduction

Financial Econometrics can be understood as the application of statistical techniques using a digital tool (the software R) to answer questions in Finance. Therefore, Financial Econometrics can be used to test theories in Finance. As such, it is supports financial decision-making.

Course content

Introduction

  • What is Financial Econometrics about?
  • Types of data
  • Returns in financial modelling
  • Steps involved in formulating an econometric model

Mathematical and statistical foundations

  • Sum and product notation
  • Functions
  • Differential calculus
  • Matrices
  • Probability and probability distributions
  • Descriptive statistics

The classical linear regression model (CLRM)

  • Regression versus correlation
  • Simple regression
  • Some further terminology
  • The assumptions underlying the CLRM
  • Properties of the OLS etsimator
  • Precision and standard errors
  • Statistical inference
  • The exact significance level

Further development and analysis of the CLRM

  • From simple to multiple linear regression
  • Calculating the parameters in the generalized case
  • The t-statistic
  • Testing multiple hypothesis: the F-test
  • Goodness of fit statistics

CLRM assumptions and the diagnostic tests

  • Statistical distributions for diagnostic tests
  • Assumption 1: Errors have zero mean
  • Assumption 2: Errors have constant variance
  • Assumption 3: Errors are linearly independent from each over time 
  • Assumption 4: Errors are linearly independent from x-variables at the same point in time
  • Assumption 5: Errors are normally distributed
  • Multicollinearity
  • Adopting the wrong functional form
  • Parameter stability tests

Disclaimer

This is an excerpt from the complete course description for the course. If you are an active student at BI, you can find the complete course descriptions with information on eg. learning goals, learning process, curriculum and exam at portal.bi.no. We reserve the right to make changes to this description.