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About this book
This is a thorough exploration of the models and methods of financial econometrics by one of the world's leading financial econometricians and is for students in economics, finance, statistics, mathematics, and engineering who are interested in financial applications. Based on courses taught around the world, the up-to-date content covers developments in econometrics and finance over the last twenty years while ensuring a solid grounding in the fundamental principles of the field. Care has been taken to link theory and application to provide real-world context for students. Worked exercises and empirical examples have also been included to make sure complicated concepts are solidly explained and understood.
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Information
26
Chapter
1
Introduction
and
Background
0.04
0.02
0.03
0.01
0.00
–0.01
–0.02
–0.03
2000
2002
2004
2006
2008
2010
Year
Rate
2012
2014
2016
2018
Figure
1.4
Return
on
the
euro/US
dollar
daily
exchange
rate
6
4
5
3
2
1
0
–1
2000
2002
2004
2006
2008
2010
Year
Rate
2012
2014
2016
2018
Figure
1.5
Daily
Tbill
Rates
return
is
r
H
-
r
L
+
R
,
where
R
is
the
appreciation
of
the
currency,
while
r
H
,
r
L
are
the
two
interest
rates.
In
Figure
1.5
we
examine
the
daily
one
month
and
one
year
T-bill
interest
rate
series
over
the
period
2002–2017.
The
series
looks
quite
unusual,
especially
since
2009
as
both
have
been
close
to
zero.
The
price
of
oil
has
been
an
important
bellwether
of
industrialized
economies.
The
price
of
oil
was
pretty
low
and
varied
very
little
from
year
to
year
until
the
OPEC
price
hike
of
1974
as
shown
in
Figure
1.7
.
Thereafter
the
price
has
been
determined
partly
by
financial
market
activity
and
partly
by
the
production
decisions
of
OPEC
and
other
nations.
The
daily
return
series
(from
1986)
shown
in
Figure
1.8
look
very
similar
to
the
stock
return
series.
Table of contents
- Cover
- Half Title
- Title Page
- Imprint Page
- Dedication
- Short Contents
- Contents
- List of Figures
- List of Tables
- Preface
- Acknowledgments
- Notation and Conventions
- 1 Introduction and Background
- 2 Econometric Background
- 3 Return Predictability and the Efficient Markets Hypothesis
- 4 Robust Tests and Tests of Nonlinear Predictability of Returns
- 5 Empirical Market Microstructure
- 6 Event Study Analysis
- 7 Portfolio Choice and Testing the Capital Asset Pricing Model
- 8 Multifactor Pricing Models
- 9 Present Value Relations
- 10 Intertemporal Equilibrium Pricing
- 11 Volatility
- 12 Continuous Time Processes
- 13 Yield Curve
- 14 Risk Management and Tail Estimation
- 15 Exercises and Complements
- 16 Appendix
- Bibliography
- Index