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Brooks, C., 2014, Introductory Econometrics for Finance, Cambridge University Press, 3 rd edition
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2. Course Structure
The course exists out of three mandatory lectures (lectures 1-3) and one optional lecture
(lecture 4). Students must be present during all the mandatory lectures. In exceptional
cases it is allowed to be absent at a lecture but only if you notified the lecturer beforehand.
Also, the lecturer is entitled to assess whether the student has the required knowledge related
to the lecture (s)he missed.
Lecture 1: Data and Excel skills
The first part of the empirical analysis of your thesis is collecting the data. The university
offers many different types of databases with financial data. For this reason it is important to
know 1) what kind of databases we have 2) what type of data can be found in each database
and 3) how to use these databases. The most frequently used databases will be demonstrated.
After you have downloaded your data, you still need to structure your data before you can
start analysing it. This can be done in many different programmes, but in almost all cases this
can be done in Excel. Therefore, students will be taught how to use Excel to manage the data
efficiently. 2
After you have structured your dataset in Excel you can import this in a statistical package to
start analysing your data. It is demonstrated how to import the data and in EViews together
with some basic understanding of the EViews programme. 3
Lecture 2: Statistical Analysis
In this lecture we spend time on the basic statistical analysis that students should know in
order to finish the thesis. We will start with explaining the basic descriptive statistics and
some bivariate tests. Afterwards, we will start with the OLS regression. Both the
mathematical backgrounds of these tests and the practical implementation of those tests will
be discussed. It is demonstrated in EViews how to do some bivariate tests and OLS
regressions. In addition we will also discuss remaining topics that should be taken into
accounts when performing an OLS regression which are;
- Control Variables
- Interaction Variables
- Autocorrelation
- Heteroscedasticity
- Multicolliniearity
- Endogeneity
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Excel does not work optimally if the dataset is huge (more than approximately 500,000 observations). Students
rarely work with those kind of dataset but if you do you should develop your programming skills (like SQL).
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EViews is the statistical program used during the lectures because it is accessible anywhere at university.
Students who have experience with more developed programs such as Stata, MatLab or R are free to use those
packages. SPSS is also allowed, but has some limitations for finance studies. If you cannot answer a question
in assignment 2 because it is not possible in SPSS than this will NOT be taken into account when grading
your assignment.
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Last, during this lecture we will go to the university library for a demonstration on
Bloomberg and Datastream, which are databases that are only available at the university
library.
Lecture 3: Advanced Statistics
In this lecture we will cover some more advanced methodologies in statistical analysis. Three
topics are covered. First, we will discuss how to do an OLS regression with panel data (i.e.
when we are investigating multiple firms/industries/countries over several time periods)
because a panel dataset brings some new challenges. Second, we will discuss the event study,
which is a method that tests how particular market or idiosyncratic events are affecting the
stock market. Last, we will consider the binary regression which is necessary if the dependent
variable in a regression equation only has two values.
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4. Examination
The course is examined by an assignment that will be published on Blackboard after the first
lecture. The assignment should be made individually. The assignment exists out of three
parts corresponding with one of the lectures. This course is graded by either PASS or FAIL,
there is no numerical grade given. The student passes the assignment if all three parts are in a
sufficient state. The deadline is June 22nd 17:00. The assignment must be submitted through
Blackboard while the Excel files used in this assignment should be send to skampen@rsm.nl.
If the Excel files are too big to send by email students can also come to office T8-51 with a
USB stick before June 23rd 16:00.
Part 1: Data management
In the first part of the assignment the student has to work with the several databases that the
university offers. In addition, the student has to merge multiple datasets from different
sources into one final dataset in Excel and make some small calculations.
Part 2: Statistical Analysis
In the second part of the assignment the student has to do several statistical checks and tests.
The student has to report descriptive statistics, perform an OLS regression with and without
interaction variables and control for problems such as autocorrelation and heteroscedasticity.
Part 3: Advanced Statistics
In the third part of the assignment the student has to perform several advanced analyses that
are more specific for a Finance topic. The student has to include fixed effects in the
regression model to capture the panel structure of the dataset and has to perform an event
study.
Failing
Students that fail this course cannot proceed with their Finance thesis. However, those
students receive one opportunity to do a resit assignment. The deadline of this assignment is
July 2nd 17:00.
There are two different types of resits:
- Small resit: If a student fails only one out of the three parts in the
assignment
- Big resit: If a student fails two or three parts.
A resit opportunity will not be given if the student fails the course due to plagiarism or other
types of fraud.
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5. Rules of Conduct
Plagiarism
All assignments are automatically checked for plagiarism. Plagiarism will result in failing the
course and will be reported to the exam board.
Illegal Records
Students are not allowed to record the lectures in any kind (i.e. video or audiotaping) without
the permission of the lecturer. Illegal recordings will be reported to the exam board.
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6. EDSC Datateam
Due to the short length of this course, it is not possible to present and demonstrate all
databases that the university offers. For this reason it is possible that very specific types of
data that you need in your thesis are not covered in this course. However, you are free to ask
questions about this during the breaks of the course, on the Discussion Board or during the
office hours. Also see the list of the most important financial databases below.
Topic Database Access
Alliances/Joint Ventures SDC Platinum University Library only
Annual Reports Company.info4 VPN
Thomson Research VPN
Annual Report Data Compustat Global VPN
Orbis VPN
Worldscope VPN
Bonds Bloomberg University Library only
Datastream University Library only
Mergent FISD5 VPN
Credit Ratings Bloomberg University Library only
CompuStat5 VPN
Mergent FISD5 VPN
Datastream University Library only
Board and Governance Data RiskMetrics/ISS5 VPN
Bloomberg University Library only
BoardEx VPN
Event Study Eventus5 VPN
Datastream Tool University Library only
Forecasting IBES5 VPN
Banking Bankscope VPN
DealScan VPN
Thomson One VPN
Compustat5 VPN
Mergers and Acquisitions Thomson One VPN
Zephyr VPN
IPOs/SEOs Thomson One VPN
Futures and Options Bloomberg University Library only
Datastream University Library only
OptionMetrics5 VPN
Stock Prices CRSP5 VPN
Bloomberg University Library only
Datastream University Library only
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Dutch firms only
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US firms only
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Next, it is also important to know that the EDSC Datateam that is located in the University
Library offers a data collection service where they can assist you in collecting data. The
Datateam offers workshops for particular databases, but you can also reserve for a 1-hour
individual slot where they can help you with your specific requests. They are also available
for questions by mail. For more information see their website:
http://www.eur.nl/edsc/
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7. Finance Journals
Below there are listed several journal in the field of Finance that you can use in working on
your literature review.
The highest ranked journals are:
- Journal of Finance
- Journal of Financial Economics
- Journal of Financial and Quantitative Analysis
- Review of Financial Studies
The remaining A-journals are:
- American Economic Reviews
- Quarterly Journal of Economics
- Journal of Political Economics
- Econometrica
- Journal of Economic Perspectives
- Reviews of Economic Studies
Some B-journals (which are still quite good) are:
- Journal of Banking and Finance
- Journal of Corporate Finance
- Journal of Econometrics
- Journal of Financial Econometrics
- Review of Finance
- Journal of Financial Intermediation
- Journal of Financial Markets
- Journal of Money, Credit and Banking
- Management Science
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