Vrije Universiteit Amsterdam
Amsterdam, The Netherlands
Area of Study
Taught In English
Recommended U.S. Semester Credits3
Recommended U.S. Quarter Units4
Hours & Credits
The objective of the course is to show how econometrics can be applied to empirical questions in finance. In particular the course will cover topics such as financial data and its properties, factor models and testing pricing efficiency, modelling volatility, risk management models, model performance comparison, simulation procedures and continuous time finance. We will investigate how characteristics of financial data such as e.g. non-normality challenges the assumptions of econometric methods and how the methods can be adapted to handle such data properties. A mixture of academic papers and practical applications is used to study how econometric methodology is employed to facilitate financial decision making and extract information from financial market data. A vital part of the course will be tutorial sessions in which students have to solve programming problems that are topic-wise related to the theory discussed in class. Matlab and Stata will be used to apply methods learned in class to actual data.
Econometric methods covered are among others, factor models, event study methodology, volatility modelling (e.g. GARCH), historical simulation, Monte Carlo simulation.
Class lectures. In separate weekly tutorials session, Matlab is used as programming tool to apply knowledge aquired in class to real data problems.
TYPE OF ASSESSMENT
Final exam – Individual assessment Grading is based to 100% on the final exam
At the beginning of the course a short introduction to Matlab is given, but students need to be aware that an active constant work effort is needed during the course to successfully master the programming part in the exam. Programming pre-knowledge is helpful but by no means a guarantee to be able to solve the programming problems sufficiently.
The course focusses on making the connection between econometric methods and applications in finance using real empirical data. Since we cover a wide variety of finance topics and there is no time to introduce finance theory a prerequisite of the course is finance knowledge on the level of at least a bachelor 101 finance course. Concepts e.g. such as interest rate compounding, different forms of return calculation, basic understanding of measuring risk in finance, different asset classes etc. need to be known already. If that is not the case students are expected to prepare themselves for the course and classes by catching up on their finance 101 knowledge. Literature resources for brushing up your finance knowledge can be: Investments (2017) by Bodie and Kane and Corporate Finance (2016) Berk and DeMarzo.
RECOMMENDED BACKGROUND KNOWLEDGE
The courses of period 3.1 in the Minor Applied Econometrics.
Courses and course hours of instruction are subject to change.
Some courses may require additional fees.