Postgraduate Course: Applications of Econometrics (CMSE11389)
||College||College of Arts, Humanities and Social Sciences
|Credit level (Normal year taken)||SCQF Level 11 (Postgraduate)
||Availability||Available to all students
|Summary||Applications of Econometrics will teach the best practices in empirical quantitative research in Finance. The focus will be on research design for achieving identification in the subarea of corporate finance and on competent error correction and estimation techniques in asset pricing. Following from the theoretical basis covered in Foundations of Econometrics, this course will teach the best practices in quantitative research at the PhD level and of top publication quality.
This course will cover latest best practice in the empirical finance literature. Students will replicate example papers and face the intricacies of working with financial data. The implementation will be in Stata, but the programming skills employed have high transferability to R and other widely used statistical packages. The course will not only equip the students with the practical skills needed for high-quality academic research but consolidate and deploy their knowledge gained in Foundations of Econometrics.
1. Endogeneity in Finance - causes and consequences; endogeneity in the regression framework; identifying and discussing the endogeneity problem
2. Shock Based DiD Designs - potential outcomes and treatment effects; continuous designs; balancing methods; Shock-Based Event Studies
3. Instrumental Variable Strategies - Heckman Selection; Credibility of Non-Shock Based Instruments; Elements of Shock-Based IV
4. Regression Discontinuity Designs - sharp and fuzzy; internal validity; falsification tests; Combined DiD/RDDiD/RD-like Designs
5. Standard Error Corrections in Finance Data; Econometric Solutions to Measurement Error
6. Return Predictability Tests
7. Asset Pricing Factor Models
Formal teaching occurs in lectures. Students will be guided in replicating good practice papers and will discuss their findings and notable methodological issues during tutorials. The assessment will be based on coursework and on a final paper containing empirical result. A high level of student participation is expected, through discussion in class and among peers outside of class. Co-operation amongst students when replicating example papers is encouraged. Students are required to have mastered the material in Foundations of Econometrics.
Entry Requirements (not applicable to Visiting Students)
|| Students MUST have passed:
Foundations of Econometrics (CMSE11388)
||Other requirements|| None
Information for Visiting Students
|Pre-requisites||Permission from the Course Organiser
|High Demand Course?
Course Delivery Information
|Academic year 2020/21, Available to all students (SV1)
|Learning and Teaching activities (Further Info)
Lecture Hours 20,
Seminar/Tutorial Hours 20,
Programme Level Learning and Teaching Hours 4,
Directed Learning and Independent Learning Hours
|Assessment (Further Info)
|Additional Information (Assessment)
||Continuous assessment (50%) comprises paper critiques and replication exercises. Weekly submissions of paper critique for the current class. Students will be required to have read the academic papers to be discussed in the forthcoming lecture and prepare a summary of the most salient points. Replication guidance of published articles and step-by-step instructions will be made available in advance of tutorial sessions. Students will work in a group and submit their code and professionally formatted results at the time of each tutorial.
Students are required to submit a research project (50%), which includes a research question, contribution to the literature, and empirical results obtained using an appropriate identification strategy. In preparation for this project, students will submit a 500-word report and a 10-minute presentation, outlining their research plan, and obtain feedback from instructors and peers. This assessment is intended to help students develop their first empirical paper.
||Feedback will be provided in the form of solutions to tutorial replication exercises. Summative feedback will be given on individual paper summary submissions and groups on their tutorial submissions plus immediate post presentation feedback.
|No Exam Information
On completion of this course, the student will be able to:
- Demonstrate a critical understanding of basic econometric methods, their applications, and limitations
- Apply contemporary Finance research methods using a statistical software
- Communicate empirical results, their implications, and limitations with peers, more senior colleagues, and specialists
- Deal with complex issues surrounding research methodology and data limitations
- Work independently and in groups when conducting empirical research
|No core textbook - required reading will consist only of academic articles|
Atanasov, Vladimir, and Bernard Black. 2016. 'Shock-Based Causal Inference in Corporate Finance and Accounting Research'. Critical Finance Review 5 (2): 207:304. doi:http://dx.doi.org/10.1561/104.00000036.
Roberts, Michael R., and Toni M. Whited. 2013. 'Chapter 7 - Endogeneity in Empirical Corporate Finance'. In Handbook of the Economics of Finance, edited by Milton Harris and Rene M. Stulz George M. Constantinides, Volume 2, Part A: 493:572. Elsevier. doi:10.1016/B978-0-44-453594-8.00007-0.
Campbell, J. Y., A. W. Lo, and A. C. MacKinlay. 2012. The Econometrics of Financial Markets. Princeton University Press. https://books.google.co.uk/books?id=7Gkri6HWWkgC.
Cochrane, J. H. 2009. Asset Pricing: (Revised Edition). Princeton University Press. https://books.google.co.uk/books?id=20pmeMaKNwsC.
|Graduate Attributes and Skills
||Research and enquiry
Personal and intellectual autonomy
|Course organiser||Dr Maria Boutchkova
Tel: (0131 6)51 5314
|Course secretary||Miss Sophi Brunton
Tel: (0131 6)51 5011