FNAN 430: Empirical Methods in Finance Master Syllabus
Course Instructor:
Office Number:
Office Hours:
Email:
Course Meeting Times:
Course Materials:
- Required: Severini, Thomas A., Introduction to Statistical Methods for Financial Models, New York: CRC Press, 2018.
Course Website: Canvas
Course Objectives and Central Theme
At the end of the course, you will be able to apply probability and statistical concepts and methods to model and analyze financial data.
The central theme of this course is that by modeling the returns on financial assets as random variables, and using basic concepts of probability and statistics, we may build a methodology for analyzing and interpreting financial data.
Course Plan
The course may be viewed in three sections. In the first section, we will review basic concepts of finance, focusing on the properties of returns on an asset. We will then cover aspects of portfolio theory, starting with the basic ideas of the theory and then concentrating on the mathematical treatment of efficient portfolios and the estimation of the parameters needed to implement the theory. In the remainder of the course, we will examine several models for financial data, along with the implications of those models for portfolio theory and for understanding the properties of return data.
We will emphasize homework as a means of reinforcing your understanding that material presented in lectures and in the textbook. You may work in small work groups on homework assignments, if you desire to do so. However, you must submit your own homework solutions. All homework will be done using R computing environment and submitted as an RMarkdowngenerated (or RNotebook-generated) Word or pdf document containing your code and output. You may include your RMD file, as a supplement to your hardcopy submission. Submit your completed assignment in the assignment drop-box.
Student Responsibilities
It’s your responsibility to be prepared for class, do your homework, and participate in class discussions. You will submit your homework and exam responses in an RMarkdown or RNotebook-generated Word or PDF document. (R Markdown and RNotebook tutorials are on our Canvas site.)
Class Policy
Your weekly homework assignments are due by midnight on Sunday of the assigned week. Late submissions will not be accepted. I will make exceptions, but only for extraordinary circumstances, e.g., birth of your child, military deployments, severe illness, death of an immediate family member. Please note that I won’t accept claims of conflicts from other course requirements or excessive workloads from your employer as justification for an extension.
Grading Standards
Your grades will be awarded based on your homework and exams.
Grading Criteria for Your Homework and Exams:
- Percent of correct solutions
Final Grade Weights
| Graded Material or Activity | Weight |
|---|---|
| Homework | 50% |
| Exam 1 | 25% |
| Exam 2 | 25% |
Grading Scheme for Final Grade
| Grade | Range |
|---|---|
| A+ | >=97.5% |
| A | 92.5%-97.4% |
| A- | 89.5%-92.4% |
| B+ | 86.5%-89.4% |
| B | 82.5%-86.4% |
| B- | 79.5%-82.4% |
| C+ | 76.5%-79.4% |
| C | 69.5%-76.4% |
| D | 59.5%-69.4% |
| F | <59.5% |
Please note that grades of C-, D+, and D- are not given.
The professor reserves the right to change the grading policy for the course.
Course Calendar (Sample)
| Week | Dates | Topic | Homework Due |
|---|---|---|---|
| 1 | Jan. 25 – Jan. 31 | R and RStudio Tutorials | “Basic Basics” Tutorials 1 through 3 |
| 2 | Feb. 1 – Feb. 7 | The Basics | Week 2 Homework Assignment |
| 3 | Feb. 8 – Feb. 14 | Severini, Chap. 2: Returns | Prob. 2.1, 2.4, 2.5, 2.13, 2.15, and 2.18 |
| 4 | Feb. 15 – Feb. 21 | Severini, Chap. 3: Random Walk Hypothesis | Prob. 3.11, 3.12, 3.14, and 3.15 |
| 5 | Feb. 21 – Feb. 28 | Severini, Chap. 4: Portfolios | Prob. 4.2, 4.3, 4.4, 4.9, and 4.14 |
| 6 | Mar. 1 – Mar. 7 | Severini, Chap. 5: Efficient Portfolio Theory | Prob. 5.1, 5.2, 5.5, 5.11, and 5.18 |
| 7 | Mar. 8 – Mar. 14 | Severini, Chap. 6: Estimation Note: substitute ATT for TWX in Prob. 6.6 and all subsequent homework problems using TWX stock returns. | Prob. 6.1, 6.3, 6.6, 6.10, 6.11 Note: substitute AT&T stock (ticker T) for Time Warner stock |
| 8 | Mar. 15 – Mar. 17 Mar. 18 – Mar 21 |
Mid-Term Review and Exam Preparation Exam 1 |
None |
| 9 | Mar. 22 – Mar. 28 | Severini, Chap. 7: Capital Asset Pricing Model | Prob. 7.1, 7.7, 7.8, 7.10, and 7.14 |
| 10 | Mar. 29 - Apr. 4 | Severini, Chap. 8: The Market Model | Prob. 8.3, 8.6, 8.10, 8.14, and 8. 15 Note: substitute AT&T for TWX; substitute Fidelity Millennium for Fidelity Contrafund |
| 11 | Apr. 5 – Apr. 11 | Severini, Chap. 9: The Single-Index Model | Prob. 9.2, 9.4, 9.6, 9.8, and 9.10 |
| 12 | Apr. 12 – Apr. 18 | Severini, Chap. 10: Factor Models | Prob. 10.4, 10.7, 10.8, 10.9, and 10.11 Note: substitute AT&T for TWX; substitute Fidelity Millennium for Fidelity Contrafund |
| 13 | Apr. 19 – Apr. 25 | Time Series | Week 13 Homework |
| 14 | Apr. 26 – Apr. 30 | Risk Management | None |
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