Empirical Methods in Financial Markets - Theory and Applications

Duration

30h Th

Number of credits

Lecturer

Cédric Heuchenne

Language(s) of instruction

English language

Organisation and examination

Teaching in the first semester, review in January

Schedule

Schedule online

Units courses prerequisite and corequisite

Prerequisite or corequisite units are presented within each program

Learning unit contents

The financial world shows a deeper and deeper interest for quantitative forecasting methods. For the broker, having good approximations of future values of his equity portfolio is essential. A financial analyst should always anticipate as well as possible the behaviour of firms in which his clients are likely to invest. In this framework, this course develops different existing methods to treat those problems. Among others, topics in the sequel can be involved.



- Forecasting of seasonal data

- Risk management

- Causality

- Autoregressive moving average models (ARMA models)

- Generalized autoregressive conditional heteroscedasticity models (GARCH models)

- Kalman filter

- ...

Learning outcomes of the learning unit

P2. Application of basic statistical methods to stochastic processes
C3. Analysis, identification of common denominators in the different methods
C4. Critical analysis of existing methods with respect to practical situations
These learning objectives are part of and precise the following Intended Learning Outcomes of the program of master in Business Engineering:

• Gaining the knowledge and understanding of one of the following fields: supply chain management, financial engineering, performance management systems or intrapreneuriat; being able to mobilize them in order to solve concrete management problems or cases
• Understanding and being capable of using modelization methods when seeking a solution for a concrete management problem
• Being capable of professional team work
• Developing a critical sense (arguing)
• Professional capacity for oral communication

Prerequisite knowledge and skills

1) Basic course in probability (cumulative distribution function, density, distribution, mean, variance, usual discrete and continuous univariate laws, multivariate normal) and statistical inference (estimation , confidence intervals, hypothesis tests). Equivalent to the content of the course: Probability and statistical inference STAT1208-1.
2) Course of quantitative methods in management: mainly multiple regression, maximum likelihood estimation and principal component analysis. For example, this content is studied in
STAT0800-1 Models and Methods in Applied Statistics, or
MQGE0005 Quantitative Methods in Management (Partim Statistics).

Planned learning activities and teaching methods

Mode of delivery (face to face, distance learning, hybrid learning)

Remote course


Additional information:

Used methodology

A3. Analysis of a practical problem by each group of students (partially followed up by the teacher).


A4. Critical synthesis of searches, readings and/or practical applications achieved by each group of students. At the end of the semester, each student presents his own results and then, each group discusses, compares the different methods and presents other possible obtained results.
During his talk, each group is invited to

1) clearly present the problem of interest in its financial context and the existing methods to solve it,

2) discuss those methods and justify the choice of one or several of them in specific cases.

Moreover, each student is expected to attend to presentations of the other students and discuss the way they treat their own problem.



Overview of the course agenda

The course is taught during ten weeks. The first two weeks, the teacher presents the different problems of interest with the necessary corresponding theoretical basic knowledge. Then, students (in groups) receive a problem and try to understand it, on one side, with a personal bibliographic search (in agreement with their group -shared bibliographic search-) and on the other side, with the theoretical courses given the weeks after. These courses are designed to both follow up each group in his work and provide a general understanding of the work achieved by the other groups. Between the weeks 5 and 7, the students and the teacher meet to assess the progress of the work and define the remaining steps to achieve. Finally, the students prepare an oral presentation of their problem and write a report for the evaluations period that follows the course.



Decomposition of the student workload

A1 Ex-cathedra lectures 24h

A3 Analysis of the problem 60h

A3 State of the progress, meetings with the teacher 10h

A4 Report 20h

A4 Presentation 6h

Recommended or required readings

Introduction syllabus and slides (useful to understand proposed works)
Advised readings:
1. Brockwell, P. J., & Davis, R. A. (1996). Introduction to Time Series and
Forecasting. New York : Springer.
2. Franses, P. H. (1998). Time series models for business and economic forecasting. Cambridge University Press.
3. Mills, T. C. (1999). The Econometric Modelling of Financial Time Series (Second ed.). Cambridge University Press.
4. Advised readings (according to each student)

Written work / report

Out-of-session test(s)


Additional information:

Evaluation tools, evaluation criterions and weighting
E4. Final report (30% of the final note, common evaluation) The evaluation is based on the clarity, the ability to synthesize and the critical analysis of the students.

E4. Oral presentation (50% of the final note, 40% individual, 10% common) 1. Quality of the presentation: quality of the slides (10%, common), scientific methodology (15%) and quality of the explanations (15%). Each student identifies and presents its own work in the bibliographical search. 2. Defence of the work: answers to the questions of the teacher and the other students (10%).

E4. Attending and discussing the works of the other students, quality of asked questions (20%, individual evaluation)
Relative weighting of individual assessment: 60%
Evaluations agenda
The final report has to be sent to the teacher before the evaluations period that follows the course. The oral presentation is usually held during the courses period.

Work placement(s)

Organisational remarks and main changes to the course

Teaching language: English

Contacts

Cédric HEUCHENNE, HEC-ULg Management School of the University of Liège, N1, local 309, email: C.Heuchenne@ulg.ac.be

Association of one or more MOOCs

Items online