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Financial Econometrics: An Example-Based Handbook
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$144.00
Authors: Anokye Mohammed Adam and Peterson Owusu Junior (University of Cape Coast, Cape Coast, Ghana) 
Book Description:
Financial modelling – and for that matter, quantitative finance – is a very crucial area of study for the decision makers to make informed and robust choices in matters of interest to the growth and survival of their organisations. Thus, the skills and knowledge (at least, in this book) must be possessed by every finance professional; risk analysts, quantitative analysts, asset and portfolio managers, compliance officers, Forex and Contract for Difference (CFD) traders, etc. Econometric and statistical models employed in financial modelling are too many to be captured under this course. The econometric models captured in this book are for the purposes of fostering understanding, appreciation, and the reality of the mathematics beneath the topics in econometrics. Broadly speaking, this book covers the various facets of regression models in this important field. Diagnostics on the linear regression model, Logit and Probit (Categorical Dependent Variable Models), Stationary and Non-Stationary Time Series, Cointegration and Error Correction Models (ECM), Autoregressive Distributed Lag (ARDL) Models, forecasting with ARIMA and Vector Autoregression (VAR) models, Panel Data Regression Models, and finally Asset Price/Return Volatility: ARCH and GARCH Models are illustrated for easy comprehension. (Nova).

Table of Contents:
Preface

Chapter 1: FINANCIAL MODELLING
1. What is financial modelling?
1.1 Types of data
1.1.1 Time series data
1.1.2 Cross-sectional data
1.1.3 Panel, Longitudinal or Micro-Panel Data data
1.2. Model Construction
1.2.1 Steps in Model Construction
1.3. Model Variables
1.3.1 Prices
1.3.2 Returns
1.3.2.1 Simple Returns
1.3.2.2 Log Returns
1.3.2.3 EViews Illustration
1.3.2.4 Excess Returns
1.3.2.5 Financial Distributions
1.3.2.6 Efficient Market Hypothesis (EMH) and Predictability
1.3.2.7 Autocorrelation
1.3.2.8 Random Walk (RW) (Martingale) and Markov Process (MP)
1.3.2.9 Variance Ratio Test
1.3.2.10 EViews Illustration of Variance Ratio Test

Chapter 2: LINEAR REGRESSION MODELS
2. Introduction
2.1 The Linear Regression Model (LRM)
2.2 Estimation of the LRM
2.3 Simple Linear Regression (CAPM Example)
2.4 Assumptions of the CLRM
2.5 Functional Form Specification
2.5.1 Logarithmic Forms
2.5.2 Polynomial Forms
2.5.3 Inverse Forms
2.5.4 Spline Forms

Chapter 3: REGRESSION DIAGNOSTICS
3.1 Goodness-of-Fit: Dependent Variable Tests
3.1.1 Coefficient of Determination (R-square)
3.1.2 Information Criteria (IC)
3.2 Independent Variables Tests
3.2.1 Independent t Test of Significance
3.2.2 Specific Coefficient Values Test
3.2.3 F Test of Explanatory Power
3.2.4 Multicollinearity Tests
3.3 Error Term Tests
3.3.1 Heteroscedasticity Tests
3.3.1.1 Breusch-Pagan-Godfrey (BP) Test
3.3.1.2 Goldfeld-Quandt Test
3.3.1.3 White’s Test
3.3.2 Autocorrelation (Serial Correlation) Tests
3.3.2.1 Durbin-Watson (DW) Test
3.3.2.2 Breusch-Godfrey Lagrangian Multiplier (BG-LM) Test
3.4 Model Evaluation
3.4.1 Model Specification Errors
3.4.1.1 Omission of Relevant Variable(s)
3.4.1.2 Inclusion of Relevant Variable(s)
3.4.1.3 Misspecification of the functional form of a regression model
3.4.1.3 Errors of measurement
3.4.2 Parameter Stability Test
3.4.2.1 Chow Test
3.4.2.2 Predictive Failure Tests
3.4.2.3 Quandt Likelihood Ratio (QLR)
3.4.2.4 Recursive Estimation for Stability Tests
3.4.3 Outliers, Leverage and Influence Data

Chapter 4: CATEGORICAL VARIABLE MODELS
4.1.1 Interactive Dummy Variables
4.1.2 Differential Slope Dummies
4.2 Dummy Variable for Structural Change
4.2 Dummy Variable for Seasonal Data
4.3 Seasonal Adjustment
4.4 Logit and Probit (Categorical Dependent Variable Model)
4.4.1 The Logit Model
4.4.2 The Probit Model
4.4.3 Diagnostics on the Logit Model

Chapter 5: STATIONARY AND NON-STATIONARY TIME SERIES
5.1: Types of Stationary Time Series
5.2 Types of Non-Stationary Time Series
5.3 Stationarity and Non-Stationarity Tests
5.3.1 Dickey-Fuller (DF) and Augmented Dickey-Fuller (ADF) Tests
5.3.2 Phillips and Perron (PP) Test
5.3.3 Kwiatkowski-Phillips-Schmidt-Shin (KPSS) Test
5.3.4 Transformation to Stationarity
5.4 Sample Questions
5.5 Dynamic Models I
5.5.1 Autoregressive (AR) Models
5.5.1.1 Lag Order Determination
5.5.1.2 AR Estimation & Model Adequacy
5.5.2 Moving Average (MA) Models
5.5.2.1 MA Order Determination
5.5.3 Autoregressive Moving Average (ARMA) Models
5.5.4 Autoregressive Integrated Moving Average (ARIMA) Models: The Box–Jenkins methodology
5.5.5 Forecasting in Financial Econometrics
5.5.5.1 Forecasting with Regression Models
5.5.5.2 Out-of-sample Forecasting with ARIMA

Chapter 6: DYNAMIC MODELS II
6.1 Cointegration
6.1.1 Tests of Cointegration
6.2 Error Correction Model (ECM)
6.3 Limitations of the Engle-Granger Approach
6.4 Johansen’s cointegration, vector error correction model (VECM)
6.5 Granger Causality
6.6 Variance Decomposition and Impulse Response Function
6.7 Vector Autoregression (VAR) Models
6.8 Autoregressive Distributed Lag (ARDL) Models and Bounds Tests

Chapter 7: PANEL DATA REGRESSION MODELS (POOLING AND PANEL ESTIMATION)
7.1 Fixed Effects Model or Random Effects Model - Hausman test
7.2 Random Effect Model or OLS - Breusch-Pagan Lagrange multiplier (LM)
7.3 Redundant Fixed Effects (Likelihood Ratio) and Wald Tests
7.4 Dynamic Panel Data Analysis
7.5 Arellano-Bond Serial Correlation Testing
7.6 Stationary Tests in Panel Data (Unit Root Tests)

Chapter 8: ASSET PRICE AND RETURN VOLATILITY
8.1 Types of Volatility
8.2 The ARCH Models
8.2 The GARCH Models
8.3 Asymmetric GARCH(1,1) Models
8.3.1 The Student t-GARCH(1,1) Model
8.3.2 Extensions and Modifications of GARCH

Review Questions

Bibliography

Index

   Series:
      Economic Issues, Problems and Perspectives
   Binding: Hardcover
   Pub. Date: 2017 - 3rd Quarter
   ISBN: 978-1-53612-331-9
   Status: AP
  
Status Code Description
AN Announcing
FM Formatting
PP Page Proofs
FP Final Production
EP Editorial Production
PR At Prepress
AP At Press
AV Available
  
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10.Nonlinearity: Problems, Solutions and Applications. Volume 1
11.Adaptive Management: Elements, Applications and Research
12.Natural Fibers: Properties, Mechanical Behavior, Functionalization and Applications

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Financial Econometrics: An Example-Based Handbook