Economics 424:  Introduction to Computational Finance and Financial Econometrics

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Lecture Notes and Class Slides

Fall 2007

Note: These notes and accompanying spreadsheets are preliminary and incomplete and they are not guaranteed to be free of errors. Some of the spreadsheets require the StatPlus Add-in. Some of the S-PLUS script files require the S+FinMetrics module, and some require the Resample library (which can be downloaded from the Insightful research library). Check the revision dates for updates. Please let me know if you find typos or other errors. Comments and suggestions are welcome. 

Return Calculations

• returnCalculations.pdf.  Lecture notes: asset return calculations. Revised October 10, 2004.

• returnCalculationSlides.pdf. Class slides: asset return calculations.  Revised March 28, 2006.

  • returnCalculations.xls.  Revised October 24, 2006.

Probability Review

• probReview.pdf. Lecture notes: review of univariate and bivariate random variables and probability distributions. Revised October 24, 2006

• probReviewSlides.pdf. Class slides: review of univariate random variables and probability distributions. Revised October 24, 2006.

• probReviewSlidesPart2.pdf. Class slides: review of bivariate distributions, and linear combinations of random variables. Revised: October 24, 2006.

  • probReview.xls.  Revised April 8, 2006

Time Series Concepts

• timeSeriesConceptsSlides.pdf.  Class slides: review of basic time series concepts (stationarity, MA and AR models). Revised: October 24, 2006.

• timeSeriesConceptsPowerPoint.pdf.  Powerpoint examples. Revised October 24, 2006.

  • timeSeriesConcepts.ssc.  S-PLUS script file used for Powerpoint examples. Revised October 24, 2006.

Descriptive Statistics

• descriptiveStatisticsSlides.pdf. Class slides. Basic descriptive statistics (histograms, sample statistics, qq-plots, boxplots, scatterplots, sample autocorrelations). Revised October 24, 2006.

• descriptiveStatisticsPowerPoint.pdf. Powerpoint examples. Revised October 24, 2006.

  • descriptiveStatistics.ssc.  Splus script file.

Constant Expected Return Model

• constantExpectedReturn.pdf. Lecture notes. The constant expected return model of asset returns. Revised February 07, 2002.

• cerModelSlides.pdf. Class slides. Revised: October 24, 2006.

• cerModelPowerPoint.pdf.  Powerpoint examples. Revised: October 24, 2006.

  • cerModelExamples.ssc.  Splus script file.

  • cerExample.xls.  Excel data file

Bootstrapping in CER Model

• bootStrapSlides.pdf.  Class slides. Revised: October 24, 2006.

• bootStrapPowerPoint.pdf. Powerpoint examples. Revised: October 24, 2006.

  • bootStrap.ssc.  Splus script file.

Hypothesis Testing in CER Model

• hypothesisTestingCERSlides.pdf. Class slides. Revised: November 6, 2006.

• hypothesisTestingCERPowerPoint.pdf. Powerpoint examples. Revised: November 6, 2006.

  • hypothesisTestingCER.ssc. Splus script file. Revised: November 6, 2006

Introduction to Portfolio Theory

• portf.pdf. Lecture notes on Introduction to portfolio theory. Revised February 21, 2001.

• portfolioTheory1Slides.pdf.  Class slides. Revised April 26, 2006.

Portfolio Theory with Matrix Algebra

• matrix.pdf. Matrix algebra review. Revised February 5, 2001.

• marko.pdf. Computing efficient portfolios using the Markowitz algorithm. Revised February 19, 2000

• matrixReviewSlides.pdf.  Class slides. Revised November 10, 2004.

• portfolioTheoryMatrixSlides.pdf. Class slides. Revised November 17, 2004.

• rollingPortfolioSlides. Class slides on the statistical analysis of efficient portfolios. Revised November 27, 2006.

• rollingPortfoliosPowerPoint.pdf.  Powerpoint examples. Revised November 27, 2006.

Single Index Model and Linear Regression

• mm.pdf. Lecture notes on the single index model of asset returns. Revised March1, 2001.

• singleIndexSlides.pdf. Class slides. Revised November 21, 2004.

• estimateSiModelSlides.pdf. Class slides. Revised  November 23, 2004.

• hypothesisTestingSlides.pdf.  Class slides. Revised November 28, 2004.

  • singleIndex.ssc

  • hypothesisTesting.ssc

Rolling Analysis of Single Index Model

• rollingSlides.pdf. Class slides. Revised May 31, 2006

• rollingPowerPoint.pdf.  Powerpoint examples. Revised May 31, 2006.

  • rolling.ssc

Capital Asset Pricing Model

• capm2.pdf. The capital asset pricing model and some simple tests.

• capmSlides.pdf.  Revised December 3, 2004.

Multi Index Models

• multiIndexSlides.pdf. Revised December 8, 2003.

Measuring Portfolio Performance

• performanceSlides.pdf. Revised December 8, 2003.