Quantitative Methods in Finance

 

Instructor:

Evgenii V. Gilenko, PhD, Associate Professor, Department of Public Administration,

e.gilenko@gsom.spbu.ru

Workload:

4 ECTS
45 contact hours

Prerequisites:

Knowledge of basics of probability theory and mathematical statistics, e.g., passing the course ‘Introduction to Quantitative Methods’ or ‘Statistics-1’

Course Description:

Goal of the course is to provide students with the required profound knowledge regarding application of quantitative tools in order to be able to estimate and understand the models and situations of modern finance theory.

At the end of the course students should have:
• theoretical and practical foundations of carrying out empirical research in the field of finance;
• skills of quantitative models estimation and their application for prediction;
• ability to consider different economic and managerial situations where quantitative statistical methods can be applied in order to obtain support for managerial decisions.

Course Content (Topics and subtopics):

Topic 1. Basic econometric analysis. Pair-wise regression

• The methodology of econometric research
• The types of data in econometric analysis
• Application of econometrics in finance
• Pair-wise regression model setup
• Specification tests and goodness-of-fit
• Forecasting with a pair-wise regression

Topic 2. Multiple regression: modeling and inference

• Multiple regression model setup.
• Omitted and redundant variables.
• Multicollinearity.
• Specification tests.

Topic 3. Multiple regression: specification problems

• Heteroskedasticity of disturbances.
• Autocorrelation of disturbances.
• Dummy variables.

Topic 4. Binary response models

• Logit- and probit-models
• Classification and goodness-of-fit

Topic 5. Time-series analysis in finance

• Non-stationary time-series.
• Spurious regression.
• Integrated time-series. Cointegration.
• ARCH/GARCH processes

Topic 6. Panel regression models in finance

• Introduction to panel data analysis.
• Fixed and random effects models.
• Specification tests.

Course Organization:

Lectures, in-class quizzes and concrete situations discussions. 

Course Reading (the full list):

Core reading:

• R. Carter Hill, William E. Griffiths, Guay C. Lim. Principles of Econometrics, 4th Edition. John Wiley & Sons, Inc.
• J. M. Wooldridge. Introductory Econometrics: A Modern Approach, 5th Edition. South-Western (Cengage Learning).

Supplementary reading:
• Kohler, Ulrich and Kreuter, Frauke (2005) Data Analysis Using Stata, College Station, Texas: Stata Press. ISBN: 1597180076.
• D.Gujarati, D.Porter. Basic Econometrics. McGraw-Hill, 2008.
• K. Cuthbertson, D. Nitzsche. Quantitative Financial Economics: Stocks, Bonds and Foreign Exchange. Chichester, UK : Wiley, 2004.

Exam format:

In-class, closed-book, 90 minutes

Grading Policy (% or points):

Course progress – 50 %, exam – 50 %.
The course progress tasks include in-class assignments and midterm exam

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