Empirics of Financial Markets

obowiązkowe

(tylko po angielsku) Finance: Stock and bond valuation, capital market models (Sharpe, CAPM, APT), term structure of interest rates (yield curve);

Econometrics: ML estimation method, panel models (both random and fixed effects), stationarity, cointegration, Arch/Garch models.

Students should get a basic knowledge and practical skills of formal econometric analysis of major financial markets (equity, fx, fixed income). The course presents basic theoretical framework and samples of empirical work modelling prices and/or returns from major financial instruments. Both active attendance and positive assessment of individual students' assignments are required to pass the course.

1.Introduction - basic concepts in quantitative finance

2-3. Efficiency of financial markets: the concept and its empirical testing

4-5. Are returns forecastable? Random walk as a model and its empirical verification.

6-7. Model definition of normal and excessive returns: CAPM and its extensions, APT. Empirical examples.

8. Volatility modelling: ARCH and GARCH models

9. Term structure of the interest rates (yield curve)

10.FX market: exchange rate theories and their tests.

11-15. Students' presentation of their assignments.

Required:

Cuthbertson, Nitzsche, 2004, Quantitative Financial Economics, Wiley

Brooks, 2005, Introductory Econometrics for Finance, Cambridge

Suggested:

Campbell, Lo, MacKinlay, 1997, The Econometrics of Financial Markets, Princeton

Gourieroux, Jasiak, 2001, Financial Econometrics, Princeton

Students are able to model and to forecast prices and returns of basic financial assets (equity, debt instruments, fx) in a comprehensive manner, including designing the research, building and estimating the propoer model, interpreting its results and reporting the outcome of the whole exercise.

KW03, KW05, KW02, KU02, KU03

Students have to present a review of one of seminal papers selected from the offered list and to prepare individual work - an empirical study of prices or returns for some financial markets covered by the course, i.e. equity, debt or fx. Assessment of this work forms a major part of total assessment, which includes also a quality of students' presentation of her/his review of a paper and his/her work in the class