IC205-Introductory Econometrics for Finance

Module Provider: ICMA Centre
Number of credits: 20 [10 ECTS credits]
Level:5
Terms in which taught: Spring term module
Pre-requisites: IC104 Introductory Quantitative Techniques for Business and Finance
Non-modular pre-requisites:
Co-requisites:
Modules excluded:
Current from: 2020/1

Email: l.schopohl@icmacentre.ac.uk

Type of module:

Summary module description:

This module introduces students to the econometric techniques that are used in the empirical finance literature. 

Aims:

Building on Introductory Quantitative Techniques for Finance module, this module aims to give students a solid understanding of the econometric approaches that are commonly employed to test financial theories. 

Assessable learning outcomes:

Upon completion of the module, students should be able to: 

• Explain the fundamentals of the statistical theory underlying the tools employed to estimate and test econometric models; 


• Formulate and validate econometric models testing financial theories and hypotheses; 


• Interpret and analyse the results from an estimated econometric model; 


• Comprehend and critically evaluate the use of econometr ics in the published academic finance literature 

Additional outcomes:

The module also aims to encourage the development of IT skills and in particular the manipulation of data using statistical software packages. Students will also improve their ability to translate abstract theoretical concepts into practical solutions to financial problems. 

Outline content:

The module covers the following topics: 

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  Relationships between variables, regression techniques and simple linear regression: assumptions, estimation (OLS), derivation 

  
  


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  The normality assumption 

  
  


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  Hypothesis testing for single and multiple hypotheses  

  
  


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  Multiple regression : the Classical Linear Re gression Model 

  
  


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  Goodness of Fit Statistics 

  
  

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  Violations of the assumptions : causes, consequences, solutions 

  
  


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  Dynamic models  

  
  


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  Long run relationships in finance  

  
  

Brief description of teaching and learning methods:

The module will be primarily lecture-based with directed textbook based supplementary reading. There will be a number of tutorial/seminar sessions – both classroom-based and computer lab-based – to aid students in developing more in-depth understanding the linkage between topics. 

Summative assessment- Examinations:

One 2-hour unseen written paper.

 

Summative assessment- Coursework and in-class tests:

One group project involving the use of Eviews to undertake econometric analyses and interpret the outcomes, to be submitted in Week 2 of the summer term. 

Formative assessment methods:

Exercises will be set for the weekly classes, at which attendance is compulsory. 

Penalties for late submission:

Penalties for late submission on this module are in accordance with the University policy.  

The following penalties for work submitted late will be applied, in accordance with the University policy:  

• where the piece of work is submitted up to one calendar week after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for the piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of five working days; 


• where the piece of work is submitted more than five working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded. 

The University policy statement on penalties for late submission can be found at: http://www.reading.ac.uk/web/FILES/qualitysupport/penaltiesforlatesubmission.pdf 

You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work. 

Assessment requirements for a pass:
A minimum mark of 40%.

Reassessment arrangements:

Re-sit examination to be taken in August/September 

Additional Costs (specified where applicable):

1) Required text books:Brooks, C. (2019). Introductory Econometrics for Finance, 4th Edition, Cambridge University Press, Cambridge (UK).  2) Specialist equipment or materials: 3) Specialist clothing, footwear or headgear: 4) Printing and binding: 5) Computers and devices with a particular specification: 6) Travel, accommodation and subsistence:

Last updated: 4 April 2020