Professional Documents
Culture Documents
Finance/CLEFIN
2013/2014 Edition
COURSE OUTLINE/OBJECTIVES
The course introduces the student to modern techniques in the area of financial (empirical)
econometrics; in particular, the interaction between theory and empirical analysis is
emphasised. The course also focused on the main econometric ingredients for portfolio
allocation: forecasting the distribution of returns.
Because of the applied emphasis, specific lab classes will illustrate how MATLAB programmes
are constructed to practically implement the tools discussed in the lectures. The course
takes as a prerequisite the introduction to MATLAB offered in the first semester within the
MATLAB project at the Department of Finance (see the section Resources on the Dept. of
Finance website for more details). Draft MATLAB codes for the solution of exercises will be
made available in advance on the course webpage, students are expected to work on them
and refine their understanding of such codes during the laboratory sessions and in class.
A prerequisite is Financial Econometrics and Empirical Finance I (20191). Keep in mind that
a Statistics Prep course has been offered between the end of August and mid-September
2013 and that the material covered in those 20 hours represent essential background, see
http://didattica.unibocconi.eu/mypage/map.php?IdUte=135242&idr=14063&lingua=eng
http://didattica.unibocconi.eu/mypage/doc.php?idDoc=15646&IdUte=48622&idr=7083&Tipo
=m&lingua=eng
Lecture notes and class presentations of the material should be taken as a guidance for
further study on the two textbook:
Brooks C. (2002) Introductory Econometrics for Finance, Cambridge University Press
(chapters 1-9, henceforth Brooks)
Christoffersen P. F. (2012) Elements of Financial Risk Management, Academic Press 2nd
edition (chapters 1-10, henceforth Christoffersen)
For each topic we will also provide suggestions for further reading, whose consultation is
left to the students initiative.
To run the Matlab codes you need to download Lesage Spatial Econometrics. Here is a useful
link: http://www.spatial-econometrics.com/ Additional packages to be downloaded and
installed to correctly run the Matlab codes assigned/developed during the classes will be
indicated during the lab sessions.
DETAILED SYLLABUS (required readings are indicated by a *; all lectures will be conveyed
by Prof. Guidolin, apart from where a different indication is provided)
Lettau, M., and S., Van Nieuwerburgh (2008), Reconciling the Return Predictability
Evidence, Review of Financial Studies, 21,1607-1652.
Valkanov, R. (2003) Long-Horizon Regressions: Theoretical Results and Applications,
Journal of Financial Economics, 68, 201-232.
Welch, I., and A., Goyal, (2008) A Comprehensive Look at the Empirical Performance of
Equity Premium Prediction, Review of Financial Studies, 21, 1455-1508.
5. Asset Allocation with simple and sophisticated models; going to the data: asset
allocation in practice [note: lecture by C. Favero].
*Lecture Notes.
6. An Introduction to Multivariate Time Series Analysis.
*Lecture Notes.
*BROOKS, chapter 6.
*CHRISTOFFERSEN, chapter 3.
7. Cointegration and error correction models.
*Lecture Notes.
*BROOKS, chapter 7.
Campbell, J. Y. and R. Shiller (1987) "Cointegration and Present Value Models", Journal of
Political Economy, 95, 1062-1088.
Lettau, M., and S., Ludvigson (2005) Expected Returns and Expected Dividend Growth,
Journal of Financial Economics, 76, 583-626.
8. Univariate Volatility Modeling: ARCH and GARCH.
*Lecture Notes.
*CHRISTOFFERSEN, chapter 4.
*ANDERSEN T., BOLLERSLEV T., CHRISTOFFERSEN P., DIEBOLD, F. (2006) Volatility and
Correlation Forecasting, in Elliott G., Granger C., and Timmermann A. (eds.), Handbook of
Economic Forecasting, Elsevier.
Engle, R. F. (2001) GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics,
Journal of Economic Perspectives, 15, 157-168.
Hansen P.R., and A., Lunde (2005) A Forecast Comparison of Volatility Models: Does
Anything Beat a GARCH(1,1)? Journal of Applied Econometrics, 20, 873889.
9. Non-Normal Distributions and their Uses in GARCH Modeling [M. Guidolin].
*Lecture Notes.
*CHRISTOFFERSEN, chapter 6.
BROOKS, chapter 8.
Jaschke, S. (2002), The Cornish-Fisher-Expansion in the Context of Delta-Gamma-Normal
Approximations, Journal of Risk, Number 4, Summer 2002.
Tersvirta T. (2009) An Introduction to Univariate GARCH Models, in Andersen, T., Davis,
R., Krei, J.-P., and Mikosch, T., Handbook of Financial Time Series, Springer.
10. Brief Overview of Realized Volatility and Covariances [M. Guidolin].
*Lecture Notes.
*CHRISTOFFERSEN, chapter 5.
BROOKS, chapter 8.
Andersen T. and Benzoni L. (2009) Realized Volatility, in Andersen, T., Davis, R., Krei,
J.-P., and Mikosch, T., Handbook of Financial Time Series, Springer.
McAleer, M., and M., Medeiros (2008), Realized Volatility: A Review, Econometric
Reviews, 27, 1045.