Empirical Finance


Course Objective

The objective of the course is to apply a set of econometric methods to
empirical finance topics. Finance is a very broad research field with a
large number of applications. It can be divided broadly into the two
areas of corporate finance and asset pricing. We will cover topics from
both areas with some more focus on asset pricing. The course gives
insight into a wide range of finance applications and students need to
be aware that every week a new topic is covered. In particular the
course will cover topics such as financial data and its properties,
factor models and testing pricing efficiency, modelling volatility, risk
management models, model performance comparison, simulation procedures
and continuous time finance. We will investigate how characteristics of
financial data such as e.g. non-normality challenges the assumptions of
econometric methods and how the methods can be adapted to handle such
data properties. A mixture of academic papers and practical applications
is used to study how econometric methodology is employed to facilitate
financial decision making and extract information from financial market
data. A vital part of the course will be tutorial sessions in which
students have to solve programming problems that are topic-wise related
to the theory discussed in class. The programming language used in the
course is Matlab and is used to apply methods discussed in class to
actual data.

Course Content

The course applies econometric methods to a broad range of finance
topics. Topics covered are among others, factor models, event study
methodology, volatility modelling (e.g. GARCH), historical simulation,
model comparison and back-testing, and simulation methods.

Teaching Methods

Class lectures. In separate weekly tutorials session, Matlab is used as
programming tool to apply knowledge aquired in class to real data

Method of Assessment

Final exam – Individual assessment: The exam is run digitally on a
computer. The exam has two parts A) open questions and multiple choice
questions need to be solved in Microsoft word with the occasional help
of the equation editor and B) programming problems need to be solve in
Grading is based to 100% on the final exam

Entry Requirements

At the beginning of the course a short introduction to Matlab is given,
but students need to be aware that an active constant work effort is
needed during the course to successfully master the programming part in
the exam. Programming pre-knowledge is helpful but by no means a
guarantee to be able to solve the programming problems sufficiently.

The course focusses on making the connection between econometric methods
and applications in finance using real empirical data. Since we cover a
wide variety of finance topics and there is no time to introduce finance
theory a prerequisite of the course is finance knowledge on the level of
at least a bachelor 101 finance course. Concepts e.g. such as interest
rate compounding, different forms of return calculation, basic
understanding of measuring risk in finance, different asset classes etc.
need to be known already. If that is not the case students are expected
to prepare themselves for the course and classes by catching up on their
finance 101 knowledge. Literature resources for brushing up your finance
knowledge can be: Investments (2017) by Bodie and Kane and Corporate
Finance (2016) Berk and DeMarzo.


Danielsson (2011): Financial Risk Forecasting
Brooks (2014): Introductory Econometrics for Finance, 3rd

Additional Information

This course in the minor Applied Econometrics is targeted at both
econometrics and non-econometrics students.

Recommended background knowledge

The courses of period 3.1 in the Minor Applied Econometrics.

General Information

Course Code E_EOR3_EFIN
Credits 6 EC
Period P2
Course Level 300
Language of Tuition English
Faculty School of Business and Economics
Course Coordinator dr. N.J. Seeger
Examiner dr. N.J. Seeger
Teaching Staff dr. N.J. Seeger

Practical Information

You need to register for this course yourself

Last-minute registration is available for this course.

Teaching Methods Seminar, Lecture, Computer lab
Target audiences

This course is also available as: