Final exam study guide


Home Syllabus Homework Notes Excel Hints S-PLUS Hints Announcements Links Project Review	Eric Zivot Economics 483 Applied Econometric Modeling in Finance Study Guide for Midterm and Final Exam Fall 2003
Last updated: December 11, 2004 The final exam will cover all the material from the course syllabus. The final exam will be concept oriented but there will also be some calculation involved so bring a calculator. I will not ask you to do proofs or long derivations. The best place to start your studying is with the homework assignments. Solutions for the homework assignments are on the homework page. Check the Notes page for updates of the class lecture notes. The exams will be closed book and closed note exam. However, I will allow one page (double sided) of handwritten or typed notes Topics to be covered for the Midterm Return calculations simple and continuously compounded returns time aggregation Review of random variables Shape characteristics (mean, variance, skewness, kurtosis) quantiles normal distribution linear functions of random variables covariance and correlation Time Series Concepts covariance stationarity Autocorrelations MA(1) and AR(1) models Descriptive statistics histograms, boxplots, qq-plots sample statistics Constant expected return model model assumptions and interpretation relationship to random walk model estimation of parameters properties of estimators - bias and precision estimating standard errors - analytic formulas and the bootstrap confidence intervals Introduction to portfolio theory characteristics of portfolios with risky and riskless assets portfolio frontier efficient portfolios global minimum and tangency portfolios Here is an old take-home midterm exam. Here is an in class midterm exam from summer 2000. Here is an in class midterm exam from summer 2001. Here is an in class midterm exam from winter 2002. Here are the solutions. Herei is an in class midterm exam from fall 2003. Here are the solutions. Topics to be emphasized on the Final Exam Portfolio Theory with Matrix Algebra Compute portfolio expected return and variance using matrix algebra Express Markowitz algorithm for finding efficient portfolios using matrix algebra Single Index Model Can you interpret the single index regression: R_i= a_i + b_iR_m + e_i ? How do you compute the covariance matrix using the single index model? Estimating beta from observed return data How do you use least square regression? How do you interpret R-square from the regression? How do you interpret the standard error of the regression? How can you test simple hypotheses about a and b in the regression? How are regression results for portfolios different than regression results for individual assets? How do you compute the beta for a portfolio? How do you interpret beta as a measure of portfolio risk? That is, what does it mean for an asset to have a beta less than 1, a beta greater than 1 and a beta equal to 1? Suppose you compute the beta of an asset with respect to the tangency portfolio. What is the relationship between the expected return on the asset and the beta with respect to the tangency portfolio? CAPM What are the assumptions behind the CAPM? What are the main implications of the CAPM? What are the testable implications of the CAPM and how do you test them? How do you use the excess returns single index model R_i* - r_f = a_i* + b_i(R_m - r_f) + e_i to test the CAPM? What is the prediction test of the CAPM? What are some problems with the prediction test? Can you interpret E[R] = r_f + b(E[R_m] - r_f)? What are the conclusion of some of the early tests of the CAPM? Final Exams Here is an old final exam (1999) final exam: winter 2001 and solutions. final exam: fall 2003 and solutions.