FIN538 Financial Econometrics

Autumn 2024

Topics
The goal of the course is to cover econometrics methods widely used in corporate finance and asset pricing with a particular emphasis on intuition and empirical applications.

Topics covered:
- Basic Econometrics
  - Ordinary Least Squares
  - Maximum Likelihood
  - Generalized Method of Moments
- Panel data and time-series specific topics
  - Fixed-effect estimators
  - Unit roots, ARMA and ARCH/GARCH Models
- From correlation to causal relations
  - Randomized trials
  - Selection on observables
  - Instrumental variables
  - Regression Discontinuity Design
  - Differences-in-differences
- Additional tools
  - Event studies
  - BHAR/CTAR and Matching methods
  - Fama-MacBeth approach
Learning outcome
After completion of the course, the student's are able to:

Knowledge
- Assess the common empirical research methods in finance
- Explain methods used in corporate finance, time series analysis and choice theory.
- Explain certain methods for testing asset pricing models
Skills
- Implement the common empirical methods in finance using STATA.
- Replicate analysis in state-of-the art empirical finance papers.
Competence
- Will be able to conduct, interpret and critically deal with empirical studies in finance.
- Has the tools and knowledge necessary to define, design and deliver the results of empirical investigations as done in academic articles.
Teaching

The course consists of 14 lectures and will be taught largely via Zoom and partly in person.
Restricted access

PhD candidates from NHH as well as PhD candidates from other Norwegian institutions can take part in the course. Participation by others is subject to the course responsible's prior approval.
Recommended prerequisites

Advanced master-level courses such as corporate finance, econometrics, asset pricing, and investments. Preferably: course in linear algebra.
Credit reduction due to overlap

The course cannot be combined with ECS503 Advanced Econometrics.
Compulsory Activity

Two individual written homework assignments.

Compulsory activities (work requirements) are valid for one semester after the semester they were obtained.
Assessment

The course grade is based on a three-hour written school exam.

Re-take is offered the semester after the course was offered for students with valid compulsory activities (work requirements).
Grading Scale

Pass - Fail
Computer tools

STATA
Literature
Lecture slides and academic papers

Reference books

On regression analysis and identification:
- Angrist, Joshua D., Pischke, Jorn-Steffen, 2009, Mostly Harmless Econometrics, Princeton University Press
- Angrist, Joshua D., Pischke, Jorn-Steffen, 2015. Mastering Metrics: the Path from Cause to Effect, NJ: Princeton University Press
- Cunningham, S., 2021, Causal inference: the mixtape, Yale University Press, New Haven & London
On GMM and empirical asset pricing:
- Cochrane, John, 2005, Asset Pricing, Princeton University Press
On cross-sectional and panel data:
- Wooldridge, J.M., 2002. Econometric Analysis of Cross Section and Panel Data. The MIT Press
Classic econometric reference books:
- Introductory: Stock, J.H., Watson, M.W., 2020, Introduction to Econometrics, Fourth Edition, Pearson Global Edition
- Advanced: Greene, W.H., 2003. Econometric Analysis. Prentice Hall, Upper Saddle River, NJ