02054 - Econometrics

Learning outcomes

At the end of the course students have been provied with basic tools for the quantitative analysis of financial markets. More specifically, students will be able to specify, estimate and interpret econometric models that explain asset price evolution, quantities and volatility of financial assets. They will be also able to carry out empirical analyses through available econometric softwares.

Course contents

1. The specifciation of econometric models: steps
   
1. Identification of the objectives for the phenomenon under study
   
2. The individuation of the available variables and measure
2. Descriptove analysis of the data: density of sample observations
1. Joint density of the observation
   
3. Factorization of joint density: conditional and marginal densities
4. Reparameterization of conditional densitites into multiple regression equations
5. Estimation. Limits and adavantages of the least squares method based on non experimental data
1. Least squares and likelihood of estimates
2. Inference in multiple regression: stochastic distributions of quadratic forms
3. Chi-square and F distributions. 
4. Relationship betwenn R2 and F
   
5. Residual variance estimation
   
6. Intepretation of econometric estimates (e-views)
6. Specification of the stochastic part of the model: the variance-covariance matrix
   
7. Minimization of the generalized sum of squares: the Aitken estimator
1. Aitken estimator (GLS) and maximum likelihood
8. The estimation of residual variance: efficiency of estimators
1. The bias in the estimate of the variance of least squares
9. The Aitken estimator and preliminary transformations of the data: transformation matrices
10. Feasible Aitken estimators (FGLS): the identification fo the transformation matrix
11. Transformation matrix in the presence of heteroschedasticity
    
1. Heteroskedasticity structures
   
2. Estimation procedure
12. Model validation: residuals analysis
13. Homoskedasticity evaluation
    
1. Analysis of variance
   

b.       White test (2)

1. Independence check
   
1. Chi-quare test based on signs
2. Durbin Watson test
   
2. Intertemporal choice model
   
1. Consumption-saving choice
   
2. Utility functions
   
3. The estimation of an asset demand equation relative to Italian households
4. Empirical results and search for a new model
   
5. Dynamic specification
   
6. Specification errors
   
7. Specification strategies: form general-to-particular and from particular-to-general
   

Readings/Bibliography

Attilio Gardini, Luca Fanelli, Giuseppe Cavaliere, Michele Costa, ECONOMETRIA, Vol 1°, Franco Angeli Editore Milano

Attilio Gardini, Slides on the econometrics of financial markets (that will be available during the course)

Assessment methods

Written and oral exam

Teaching tools

Econometric software

Office hours

See the website of Attilio Gardini

See the website of Luca Fanelli