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ECON3034 – Financial Econometrics

2024 – Session 1, In person-scheduled-weekday, North Ryde

General Information

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Unit convenor and teaching staff Unit convenor and teaching staff Unit coordinator
Shuping Shi
shuping.shi@mq.edu.au
Credit points Credit points
10
Prerequisites Prerequisites
ECON2041 or STAT2372 or AFIN2070
Corequisites Corequisites
Co-badged status Co-badged status
Unit description Unit description

This unit examines econometric techniques that are used in portfolio management, risk management and securities analysis. It provides students with the tools necessary for financial applications in these and other areas. Statistical techniques are developed in the context of particular financial applications. Recent empirical evidence is also discussed.

Important Academic Dates

Information about important academic dates including deadlines for withdrawing from units are available at https://www.mq.edu.au/study/calendar-of-dates

Learning Outcomes

On successful completion of this unit, you will be able to:

  • ULO1: Apply econometric methods to modelling, analysing and forecasting financial data.
  • ULO2: Demonstrate and explain different estimation methodologies.
  • ULO3: Critically evaluate empirical econometric work.
  • ULO4: Present results based on financial econometric analysis, to a non-technical audience, in a clear and understandable manner.

General Assessment Information

Late Assessment Submission Penalty (written assessments)

Unless a Special Consideration request has been submitted and approved, a 5% penalty (of the total possible mark) will be applied each day a written assessment is not submitted, up until the 7th day (including weekends). After the 7th day, a grade of ‘0’ will be awarded even if the assessment is submitted. Submission time for all written assessments is set at 11.55pm. A 1-hour grace period is provided to students who experience a technical concern.  For any late submissions of time-sensitive tasks, such as scheduled tests/exams, performance assessments/presentations, and/or scheduled practical assessments/labs, students need to submit an application for Special Consideration.

Assessment Tasks

Name Weighting Hurdle Due
Final examination 40% No University Examination Period
Class test 30% No Week 7 (during lecture time)
Assignment 30% No Week 10, Wednesday 11:55pm (Sydney time)

Final examination

Assessment Type 1: Examination
Indicative Time on Task 2: 30 hours
Due: University Examination Period
Weighting: 40%

 

A two-hour examination will be held during the University Examination Period, and will consist of multiple-choice and short-answer questions. Computer outputs and statistical tables will be provided.

 
On successful completion you will be able to:
  • Demonstrate and explain different estimation methodologies.
  • Critically evaluate empirical econometric work.

Class test

Assessment Type 1: Quiz/Test
Indicative Time on Task 2: 15 hours
Due: Week 7 (during lecture time)
Weighting: 30%

 

The class test will be held during the week 7 lecture. The test will consist of multiple-choice questions, and will cover all material up to and including Week 5.

 
On successful completion you will be able to:
  • Apply econometric methods to modelling, analysing and forecasting financial data.
  • Demonstrate and explain different estimation methodologies.

Assignment

Assessment Type 1: Quantitative analysis task
Indicative Time on Task 2: 25 hours
Due: Week 10, Wednesday 11:55pm (Sydney time)
Weighting: 30%

 

Written questions exploring various aspects of Financial Econometrics.

 
On successful completion you will be able to:
  • Critically evaluate empirical econometric work.
  • Present results based on financial econometric analysis, to a non-technical audience, in a clear and understandable manner.

1 If you need help with your assignment, please contact:

  • the academic teaching staff in your unit for guidance in understanding or completing this type of assessment
  • the Writing Centre for academic skills support.

2 Indicative time-on-task is an estimate of the time required for completion of the assessment task and is subject to individual variation

Delivery and Resources

Delivery 

The intended delivery mode is as per the timetable: Macquarie University Timetables. If this link does not work, enter: timetables.mq.edu.au/2024/ into your browser. 

Resources

The prescribed textbook for the unit is:

  • Brooks, C. (2019) Introductory Econometrics for Finance, 4th Edition, Cambridge University Press. 
  • Hurn, S., Martin, V. L., Yu, J., and Phillips, P. C.B. (2020), Financial Econometric Modeling, Oxford University Press.

In addition to the textbook, the following references are useful but are not required.

  • Diebold, F. (2007) Elements of Forecasting, 4th Edition, South-Western College.
  • Enders, W. (2014) Applied Econometric Time Series, 4th Edition, Wiley.

Material such as lecture slides, examples, and tutorial questions will be available on the unit home page. The text and lecture notes, together with the lectures and additional references will provide students with a clear indication of the basic content of the unit.

It is recommended that students attend all lectures and tutorials for several reasons including:

  • Not all the material in the text is included in the unit, and not all the material in the unit is covered in the text. In some places the text deals with issues in greater depth than is necessary for the unit, and in other places it doesn’t go far enough. The lectures contain all the unit material taught at the level required for the assessment tasks, and are your guide to the unit content.
  • The approaches to some problems that are recommended by the lecturer are different to those in the text.
  • The lectures will include guidance about the style and content of the final exam and recommendation about study technique.
  • It is difficult (and often impossible) for staff to provide meaningful assistance to students outside class times on topics for which they did not attend the relevant lectures and tutorials.

Technology Used and Required

Students are required to use a computer to carry out certain tasks of the course, such as tutorials and assignments. The software programs used in this course include EViews and Microsoft Excel. 

Unit Web Page

• Course material is available on the learning management system (iLearn), which can be found at: http://ilearn.mq.edu.au.

Unit Schedule

 

The list below is a proposed study plan, but this may be modified as we progress through the semester to allow us to take more or less time with different sections of the course as required.

Week No.

Lecture Topic

Tutorials

1

Characteristics of Financial Data; Revision of Basic Mathematical and Statistical Concepts                   

Textbook: Chapter 1 and Chapter 2, all sections; 4th or 3rd Edition. Lecture Notes. 

  

2

Correlation and Basic Regression Methods

Textbook: Chapter 3, all sections, excluding the appendix; 4th or 3rd Edition. Lecture Notes.

Tutorial Week 2

3

Multiple Linear Regression Model

Textbook: 4th Edition Chapter 4, Sections 4.1 to 4.7 inclusive, Section 4.9. Lecture Notes;

or

Textbook: 3rd Edition Chapter 4, Sections 4.1 to 4.8 inclusive, Section 4.10. Lecture Notes.

Tutorial Week 3

4

Regression Model Diagnostics

Textbook: Chapter 5, all sections. Chapter 10, Sections 10.1 to 10.3 inclusive; 4th or 3rd Edition. Lecture Notes.

Tutorial Week 4

5

Time Series Models

Textbook: Chapter 6, Sections 6.1 to 6.5; 4th or 3rd Edition. Lecture Notes.

Tutorial Week 5

6

Identification of Time Series Models

Textbook: Chapter 6, Sections 6.1 to 6.5; 4th or 3rd Edition. Lecture Notes.

Tutorial Week 6

7

Class Test

Tutorial Week 7

8

Forecasting with Time Series Models

Textbook: 4th Edition, Chapter 6, Sections 6.10. Lecture Notes;

or

Textbook: 3rd Edition, Chapter 6, Sections 6.11 and 6.12. Lecture Notes.

Tutorial Week 8
 

Mid-semester Break

  

9

Modeling Volatility: Specification and Estimation of ARCH and GARCH Models

Textbook: Chapter 9, Sections 9.1 to 9.4 inclusive, Sections 9.6 to 9.9 inclusive; 4th or 3rd Edition. Lecture Notes.

Tutorial Week 9

10

Modeling Volatility (Extensions of GARCH Models) and Forecasting Volatility

Textbook: 4th Edition, Chapter 9, Sections 9.10 to 9.18 inclusive, Lecture Notes;

or

Textbook: 3rd Edition, Chapter 9, Sections 9.10 to 9.19 inclusive, Lecture Notes.

 

Assignment due Wednesday @ 11:55pm (Sydney time).

Tutorial Week 10

11

Nonstationarity in Financial Time Series

Textbook: 4th Edition, Chapter 8, Sections 8.1. Lecture Notes;

or

Textbook: 3rd Edition, Chapter 8, Sections 8.1 & 8.3. Lecture Notes

Tutorial Week 11

12

Long-Run Relationships in Finance

Textbook: 4th Edition, Chapter 8, Sections 8.3 to 8.6.1 inclusive. Lecture Notes;

or

Textbook: 3rd Edition, Chapter 8, Sections 8.3 to 8.7.1 inclusive. Lecture Notes.

Tutorial Week 12

13

Revision

Tutorial Week 13

Policies and Procedures

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Students seeking more policy resources can visit Student Policies (https://students.mq.edu.au/support/study/policies). It is your one-stop-shop for the key policies you need to know about throughout your undergraduate student journey.

To find other policies relating to Teaching and Learning, visit Policy Central (https://policies.mq.edu.au) and use the search tool.

Student Code of Conduct

Macquarie University students have a responsibility to be familiar with the Student Code of Conduct: https://students.mq.edu.au/admin/other-resources/student-conduct

Results

Results published on platform other than eStudent, (eg. iLearn, Coursera etc.) or released directly by your Unit Convenor, are not confirmed as they are subject to final approval by the University. Once approved, final results will be sent to your student email address and will be made available in eStudent. For more information visit connect.mq.edu.au or if you are a Global MBA student contact globalmba.support@mq.edu.au

Academic Integrity

At Macquarie, we believe academic integrity – honesty, respect, trust, responsibility, fairness and courage – is at the core of learning, teaching and research. We recognise that meeting the expectations required to complete your assessments can be challenging. So, we offer you a range of resources and services to help you reach your potential, including free online writing and maths support, academic skills development and wellbeing consultations.

Student Support

Macquarie University provides a range of support services for students. For details, visit http://students.mq.edu.au/support/

The Writing Centre

The Writing Centre provides resources to develop your English language proficiency, academic writing, and communication skills.

The Library provides online and face to face support to help you find and use relevant information resources. 

Student Services and Support

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Student Enquiries

Got a question? Ask us via the Service Connect Portal, or contact Service Connect.

IT Help

For help with University computer systems and technology, visit http://www.mq.edu.au/about_us/offices_and_units/information_technology/help/. 

When using the University's IT, you must adhere to the Acceptable Use of IT Resources Policy. The policy applies to all who connect to the MQ network including students.

Unit information based on version 2024.03 of the Handbook