Courses in financial economics and econometrics
For the last several years, I have had the opportunity of giving lectures to Ph.D. students at the University of Carlos III and, before that, at the University of Rome at Tor Vergata. Now I also am teaching a short course — about 20 to 30 hours in a week — to students in the Master's in Finance program at Trinity College, Dublin.
I am an Adjunct Professor at the University of Carlos III in Madrid. The lectures since 2005 have been on a variety of topics, including economic growth and financial development, banking panics and historical banking. I lecture for about ten or so hours during a week to Ph.D. students in Business, including fields other than finance.
A while ago now, I gave lectures at the University to Ph.D. students at the University of Rome at Tor Vergata in a couple of different weeks. The lectures are introductions to the subjects covered. The lectures at the University of Rome generally were on Financial Econometrics.
The one lecture at Tor Vergata on a non-econometric topic was on rational expectations. Notes on Rational Expectations is a concise explanation of rational explanations comprehensible to graduate students. It has more English than math.
Financial Econometrics at Trinity College, Dublin
In 2009, I gave a one-week, 30-hour course in Financial Econometrics at Trinity College, Dublin. (No, I didn't lecture the whole time. I would have died and they would have been bored beyond bearing.) This course is for students in the Masters in Finance program. Fortunately, the exam was some time later, so the students had my lectures, the book and occasional correspondence to help them actually learn the material. This worked better than anticipated. I also found that making up the lectures was a daunting task.
I used Ruey Tsay's book Analysis of Financial Time Series
I divided up the lectures by topics. These slides will be revised — and I hope improved — when I teach the course again in January 2010. Still, I think the notes cover the topics reasonably well given the time available. The matrix algebra that I used at times ended up being a mistake. Matrix algebra is simple and easy if you're conversant in it. If you're not comfortable with it, it is a waste of time. The topics covered are: Estimation, Introduction to Financial Econometrics, Univariate linear time series, Volatility, Nonlinear time series, Market microstructure, Continuous–time models, Value at risk, Multivariate time–series analysis, Factor models of returns, Multivariate models of volatility. The coverage of the topics is no where near even in terms of time. A couple of topics were discussed for only an hour. Some others were discussed for four hours.
Financial Economics at Carlos III
The financial turmoil was a hot topic in 2009, maybe even more so than in 2008. So, I lectured on it again. Because quite a bit had happened in the intervening year and I had learned a lot, the lecture on the financial crisis was quite a bit longer than in the prior year. With the run on the money market mutual funds in the U.S. punctuating the financial crisis proper, a brief lecture on bank runs became topical as well. The financial turmoil in 2007 and 2008 was a natural subject for the lectures in 2008. The financial turmoil has wide-ranging repurcussions and isn’t trivial to understand. I talked about recent events and one way of thinking about them. We discussed possible meanings of financial stability and came up with a reasonable starting point for thinking about what it means and why there might be scope for government policy. Then we talked about actual policy initiatives by the Federal Reserve. Then I very, very briefly summarized some relevant research. The topics are covered in separate files. The Events are the subject of the first file. There is interpretation, both in the selection of developments covered and in the connections drawn. Government Policy Actions are covered in the second file. A little bit of the literature on Related Theory and Empirical Analysis is summarized in the final file.
In 2007, I discussed bubbles. The first two lectures introduce Bubbles in Asset Prices, discuss the major theories and summarize the empirical evidence. The experimental evidence generated the most spirited discussion, maybe partly because the students were unfamiliar with laboratory experiments in economics, finance and accounting. I also discussed estimation of Expected Returns at a more basic level than I might have made a similar presentation to finance Ph.D. students. This lecture partly reflects material in my paper with Cora Barnhart on "Returns to Investors in Stock in New Industries".
Bank runs and bubbles in financial markets were topic for the lectures at Carlos III in 2006. The first and second lectures were on Bank Runs, in which I focused on the issue of banks’ promises of what they cannot deliver in all states of the world -- everyone’s money back at the same time. The third and fourth lectures summarized the literature on the Free Banking episode in the U.S. This is a foreign experience for the students and shows that banking arrangements can be radically different than the current ones. These lectures are partly based on my own research discussed in the Panics link on this website. The fifth lecture is a brief introduction of Bubbles, much discussed but often not thoughtfully. These lectures are a prelude to the lectures in 2007.
Finance and growth was the topic for the lectures at Carlos III in 2005. The first lecture on Finance and Growth: Basic Issues Concerning Growth mostly is a summary of what is known about economic growth. The second lecture Economic Growth Theory and Financial Development briefly summarizes theories of economic growth and their relationship to financial development. Empirical Work on Economic Growth and Financial Development summarizes the empirical evidence. The last lecture on Topics on Finance and Growth: Policy and Data discusses some policy issues and issues concerning data and their use in many papers.
Financial Econometrics Lectures at the University of Rome
The lectures at the University of Rome at Tor Vergata are on “Nonlinear Time Series in Finance,” “Vector Autoregressions in Finance and Economics” and “Event Studies.” I wrote these lectures up as text discussions of the topics.
Nonlinear Time Series and Financial Applications is a very brief introduction to nonlinear time series based on two lectures at the University of Rome. Since there were four hours to cover what could take a full course or two, you know the coverage is brief! Some familiarity with linear time series analysis helps.
The Lecture Notes on Vector Autoregressions in Finance and Economics are elementary (for Ph.D. students!) Some references at the same level as the lecture are provided at the end of the notes.
The Lecture Notes on Event Studies provide a fairly thorough introduction without the details in Chapter 4 of Campbell, Lo and MacKinlay The Econometrics of Financial Markets. I know of no better source of information about event studies than their chapter. This somewhat simplified summary leaves out some details that can obscure the basic points.