Semester
Spring 2010.
 

Lecturer
Bent Jesper Christensen, University of Aarhus.

Purpose

To provide PhD students with a firm understanding of the econometric methods used in empirical finance research. Both theoretical finance models and econometric methods are introduced, and the emphasis is on the interplay between the two. The course covers discrete time as well as continuous time models.

Structure

The course is taught every Friday starting February 5. Students taking also the other PhD-course Advanced Financial Economics taught every Thursday by Prof. Claus Munk may stay overnight (Thursday) in Aarhus. During the semester, there will be compulsory theoretical and empirical homeworks.

Exam

There is a final one-day take-home exam. The exam questions are distributed by email in the morning. Students return their answers by email by 16:00 the same day.

Prerequisites

Participants are expected to have basic knowledge (at the Master's level) of finance theory, linear algebra and optimization, probability and statistics, stochastic processes, and econometrics. This should cover CAPM, the term structure of interest rates, option pricing, linear regression analysis, and software for econometric analysis (e.g., SAS, Gauss, Ox, EViews, PC_GIVE, or similar). The course is taught at the PhD level, and pace and depth exceed those in Master's courses.

Readings

Campbell, Lo & MacKinlay: The Econometrics of Financial Markets. Princeton University Press, 1997.

Christensen & Kiefer: Economic Modeling and Inference. Princeton University Press, 2009.

Topics covered

Markets for stocks, bonds, interest rates, and options. Corporate finance. Event studies. Market microstructure. Tests of asset pricing and option pricing models in discrete and continuous time. Multivariate regression analysis. Generalized method of moments. Efficient method of moments. Maximum likelihood. Nonparametric methods. Cross-sectional, time series and panel methods. Cointegration. Autoregressive conditional heteroskedasticity (ARCH) and GARCH (generalized ARCH). Diffusion models. Implied, realized and stochastic volatility. Forecasting, Filtering. Arbitrage and equilibrium models. Dynamic programming. Numerical optimization. Finite difference methods. Monte Carlo methods. Bootstrap.

Dates

·         Fridays from February 5 through May 28

Place
All meetings will take place in room 336, building 1325 at University of Aarhus, Denmark.

Enrollment

Please sign up as soon as possible by email to Bent Jesper Christensen at bjchristensen@econ.au.dk or Kirsten Stentoft at kbs@cls.dk.