Financial economics and econometrics / Nikiforos T. Laopodis.

Format:

Book

Author/Creator:

1961- Laopodis., author.

Contributor:

Nikiforos.

Series:

Routledge advanced texts in economics and finance.

Routledge advanced texts in economics and finance

Language:

English

Subjects (All):

Finance.

Finance--Econometric models.

Econometrics.

Physical Description:

1 online resource (767 pages)

Place of Publication:

London ; New York, New York : Routledge, [2022]

Summary:

Financial Economics and Econometrics provides an overview of the core topics in theoretical and empirical finance, with an emphasis on applications and interpreting results. Structured in five parts, the book covers financial data and univariate models; asset returns; interest rates, yields and spreads; volatility and correlation; and corporate finance and policy. Each chapter begins with a theory in financial economics, followed by econometric methodologies which have been used to explore the theory. Next, the chapter presents empirical evidence and discusses seminal papers on the topic. Boxes offer insights on how an idea can be applied to other disciplines such as management, marketing and medicine, showing the relevance of the material beyond finance. Readers are supported with plenty of worked examples and intuitive explanations throughout the book, while key takeaways, 'test your knowledge' and 'test your intuition' features at the end of each chapter also aid student learning. Digital supplements including PowerPoint slides, computer codes supplements, an Instructor's Manual and Solutions Manual are available for instructors. This textbook is suitable for upper-level undergraduate and graduate courses on financial economics, financial econometrics, empirical finance and related quantitative areas.

Contents:

Cover

Half Title

Series

Title

Copyright

Dedication

Contents

List of figures

List of tables

List of boxes

Preface

Acknowledgments

Part I Characteristics of financial data and univariate models

1 Introduction to financial economics and econometrics

1 What is financial economics?

2 What is financial econometrics?

3 What are quantitative finance and financial engineering?

4 Financial economics and econometrics and other disciplines

5 Plan of the book

2 How to write a research paper

Introduction

1 Finding a topic

2 Literature review

3 Methodology

4 Data

5 Empirical analysis and discussion

6 Summary and conclusions

7 Finance journals and data sources

8 Putting it all together

3 The characteristics of financial series

1 Macro vs. financial data

2 Distributional properties of financial series

2.1 Raw vs. transformed series

2.2 Descriptive statistics

2.3 Graphical illustrations

2.4 Some empirical evidence

3 Stylized facts of financial series

3.1 Linear dependencies

3.2 Nonstationarity

3.3 Calendar effects

3.4 Long memory

3.5 Nonlinearities

3.6 Chaos

3.7 Other characteristics

3.7.1 Scaling

3.7.2 Volume

3.7.3 Extreme values

Key takeaways

Test your knowledge

Test your intuition

4 Univariate properties of financial time series

1 Introduction

2 Nonstationarity

2.1 Nonstationary models

3 Stationarity and processes

3.1 Making a series stationary

Differencing

Curve fitting

3.2 Autoregressive model

3.2.1 Autocorrelation function

3.2.2 Partial autocorrelation function

3.3 Moving average model

3.4 ARMA model

3.4.1 Causality in ARMA(p,q)

3.5 Building AR, MA and AR(I)MA models

3.6 The Box-Jenkins approach

3.6.1 Model identification

Graphical approach.

3.6.2 Econometric approach

3.6.3 Model estimation

3.6.4 Model validation

3.6.5 Forecasting

3.6.6 Some comments on ARMA specifications

An example

3.6.7 Overview of modeling and forecasting time series

4 Some empirical evidence

5 Short­ and long-run relationships among time series

2 Short­term relationships

2.1 Covariance and correlation

2.2 Causality

2.2.1 Granger causality

2.2.2 Application

2.2.3 Early evidence on causality among stock prices and macro variables

3 Unit roots

3.1 Motivation

3.2 Dickey-Fuller unit root tests

3.3 Phillips­Perron unit root test

3.4 Kwiatkowski, Phillips, Schmidt and Shin unit root test

3.5 Ng and Perron unit root test

3.6 On the inclusions of a constant and/or a trend

3.7 An example

3.8 Unit root testing under structural breaks

3.8.1 Some issues

3.8.2 Some examples

3.9 Empirical evidence

4 Cointegration

4.1 Motivation

4.2 Cointegration tests

4.2.1 The Engle and Granger cointegration approach

4.2.2 Some examples of cointegration and economic equilibrium

Stock prices and dividends

Purchasing power parity

Consumption, income and wealth

Money demand

Relationships among interest rates

4.2.3 The residuals­based cointegration approach

4.2.3 The Phillips-Ouliaris cointegration test

4.2.4 The Durbin-Watson cointegrating statistic test

4.2.5 Autoregressive distributed lag (ADL) model

4.2.6 The Johansen approach

4.2.7 Rolling­sample cointegration

4.2.8 A trivariate VECM

4.2.9 An example

4.2.10 Advances in cointegration

5 Cross (auto)correlations

5.1 Definition

5.2 Motivation

5.3 Implementation and interpretation

5.3.1 An example

5.4 Some empirical evidence

Key takeaways.

Test your knowledge

Part II Asset returns

6 The efficient market hypothesis and tests

1 The efficient market hypothesis (EMH)

1.1 Preliminaries

1.2 Forms of market efficiency

1.3 Tests of market efficiency

1.3.1 Nonparametric tests

Run(s) test

Unit root tests

1.3.2 Parametric tests

Variance ratio tests

Serial correlation tests

2 Other tests of market efficiency

2.1 Preliminaries

2.2 Event study methodology

2.2.1 Abnormal returns

Cumulative abnormal returns

Buy-and-hold abnormal returns

Jensen's alpha

2.2.2 Complications

On computing expected and normal returns

On setting the statistical hypotheses

Other potential issues

2.2.3 Event study design

3 Other models for testing the EMH

3.1 Univariate models

3.2 Multivariate models

3.3 Other models

4 Selected empirical evidence

4.1 Short­term patterns in stock returns

4.2 Long­term patterns in stock returns

4.3 Market anomalies

5 Where do we stand now on EMH?

7 The capital asset pricing model and its variants

1 Theoretical motivation

1.1 Risk aversion, portfolio risk and diversification

1.2 Mean­variance model in brief

1.3 Assumptions of CAPM

1.4 Derivation of CAPM

1.5 The security market line

1.6 The zero­beta model

1.7 Some issues with CAPM

2 Econometric methodologies

2.1 The simple linear regression model

2.2 CAPM specifications

2.2.1 Time­series specifications

The Single Factor Model

2.2.2 Cross­section regression specifications

The Black, Jensen and Scholes approach

The Fama-MacBeth methodology

M-CAPM vs. B-CAPM vs. SL-CAP

The Fama-French methodologies

2.2.3 The generalized method of moments approach.

2.3 Empirical evidence on CAPM

2.3.1 Roll's critique

3 Some extensions/variants of CAPM

3.1 Merton's intertemporal CAPM

3.2 The consumption CAPM

3.3 The X­CAPM

3.4 The liquidity CAPM

3.5 The international CAPM

3.6 The H­CAPM

4 The equity premium puzzle

4.1 The problem

4.2 Explaining the puzzle

8 Multifactor models and the Arbitrage Pricing Theory

1 Categories of factor models

1.1 Macroeconomic factor models

1.2 Fundamental factor models

1.3 Statistical factor models

2 Factor­construction methodologies

2.1 Autoregressive process

2.2 Moving average process

2.3 ARMA process

2.4 Time­series regression methodology

2.5 Cross­section regression methodology

2.6 Factor and principal components analyses

2.6.1 Factor analysis

2.5.2 Principal component analysis

3 Determining the number of factors

3.1 Some empirical evidence

4 The Arbitrage Pricing Theory

4.1 Assumptions

4.2 Differences between APT and CAPM

4.3 The specification

4.4 Factor sensitivities

4.5 What are the common or systematic factors?

4.6 Empirical tests and applications of APT

4.7 Empirical analyses of APT

Time­series regressions

4.8 International APT

4.9 Some notable APT applications

Chen, Roll and Ross

Chan, Chen and Hsieh

Some comments on the CRR and CCH papers

Flannery and Protopapadakis

5 Important multifactor models

5.1 The Fama and French three­factor model

5.2 The expanded FF three­factor model

5.3 The FF five­factor model

5.4 The Carhart four­factor model

6 Other multifactor models

6.1 The Pástor­Stambaugh model

6.2 The Burmeister, Roll and Ross model

6.3 The Fung­Hsieh factor models

6.4 The Hou, Xue and Zhang q­factor model.

7 Some econometric issues and methodologies

7.1 Heteroscedasticity

7.1.1 The White test

7.1.2 The Goldfeld-Quandt test

7.1.3 The generalized least squares approach

7.2 Serial correlation

7.2.1 The Cochrane-Orcutt approach

7.3 Quantile regression

7.4 Rolling regression

8 Some final comments on multifactor models

Part III Interest rates, yields and spreads

9 The risks and the term structure of interest rates

1 Interest­rate determination

1.1 The loanable funds theory

1.2 The liquidity preference theory

2 US Treasury bills and inflation

3 Money and capital market rates

3.1 Money market rates

3.2 Capital market rates

4 The risk structure of interest rates

5 The term structure of interest rates

5.1 The yield curve

5.1.1 Spot and forward rates

5.1.2 Slopes of the yield curve

5.2 Swap rate yield curve

5.3 Theories of the term structure of interest rates

5.3.1 The expectations theory

5.3.2 The liquidity preference theory

5.3.3 The preferred habitat theory

5.3.4 The market segmentation theory

5.4 Practical importance of the yield curve

6 Some empirical evidence on the term structure

7 Interest rate models

7.1 Some basic concepts

7.2 Single­factor, short interest rate models

7.2.1 The Vasicek (1977) models

7.2.2 The Rendleman-Bartter (1980) model

7.2.3 The Hull and White (1987, 1990) model

7.2.4 The Cox-Ingersoll-Ross (1985) model

7.2.5 The Ho and Lee (1986) model

7.2.6 The Dothan (1978) model

7.2.7 The Black-Derman-Toy (1990) model

7.2.8 The Black and Karasinski (1991) model

7.2.9 The Heath et al. (1992) model

7.2.10 The Kalotay-Williams-Fabozzi (1993) model

7.2.11 The Squared Gaussian Model

7.3 Evaluation of one­factor, short rate models.

7.4 Multifactor interest rate models.

Notes:

Includes bibliographical references and index.

Description based on print version record.

Other Format:

Print version: Laopodis, NIkiforos T. Financial Economics and Econometrics

ISBN:

1-00-320500-3

1-003-20500-3

1-000-50608-8

9781003205005

OCLC:

1285172437