Aim
The goal of the course is to develop the students’ understanding of empirical models in finance and their ability to apply the econometrical methods to test the models.

Knowledge and understanding
For a passing grade the student must

• have a thorough understanding of the most important models in finance

• have a thorough understanding of econometric techniques applied in finance

• have an ability to understand and evaluate existing empirical work in finance

Skills and abilities
For a passing grade the student must

• apply econometric methods to test financial models,

• employ the methods and theories they have learnt to new problems and to carry out their own empirical analyses,

• analytically handle quantitative empirical material and to use scientific methods to analyse such material.

Judgement and approach
For a passing grade the student must

Contents
The course begins with a brief discussion of the estimation methods, such as Least Square (LS), Maximum Likelihood (ML) and Generalised Method of Moment (GMM), which is followed by a description of the time-series properties of various financial data. Thereafter, it gives a presentation of the most important theoretical models in finance that is accompanied by an explanation of the available methods for testing the theoretical hypotheses. The course concentrates on the following issues: tests for information efficiency, market microstructure, event study, portfolio valuation, tests for the asset pricing models and fixed incomes. There is a number of computer exercises which are supposed to give the students practical skills for solving econometric problems.

Literature
Campbell, J.Y., Lo, A.W. & Macinlay, A.C.: The Econometrics of Financial Markets. Princeton University Press 1998.
Brooks, C.: Introductory Econometrics for Finance. Cambridge Unversity Press 2002
Supplementary material