The Basics of Financial Econometrics: Tools, Concepts, and Asset Management Applications

Contents

Preface

Acknowledgments

About the Authors

CHAPTER 1

Introduction

Financial Econometrics at Work

The Data Generating Process

Applications of Financial Econometrics to Investment Management

Key Points

CHAPTER 2

Simple Linear Regression

The Role of Correlation

Regression Model: Linear Functional Relationship between Two Variables

Distributional Assumptions of the Regression Model

Estimating the Regression Model

Goodness-of-Fit of the Model

Two Applications in Finance

Linear Regression of a Nonlinear Relationship

Key Points

CHAPTER 3

Multiple Linear Regression

The Multiple Linear Regression Model

Assumptions of the Multiple Linear Regression Model

Estimation of the Model Parameters

Designing the Model

Diagnostic Check and Model Significance

Applications to Finance

Key Points

CHAPTER 4

Building and Testing a Multiple Linear Regression Model

The Problem of Multicollinearity

Model Building Techniques

Testing the Assumptions of the Multiple Linear Regression Model

Key Points

CHAPTER 5

Introduction to Time Series Analysis

What Is a Time Series?

Decomposition of Time Series

Representation of Time Series with Difference Equations

Application: The Price Process

Key Points

CHAPTER 6

Regression Models with Categorical Variables

Independent Categorical Variables

Dependent Categorical Variables

Key Points

CHAPTER 7

Quantile Regressions

Limitations of Classical Regression Analysis

Parameter Estimation

Quantile Regression Process

Applications of Quantile Regressions in Finance

Key Points ...