JAIPURIA INSTITUTE OF MANAGEMENT, NOIDA

PGDM (G-SM-M); TRIMESTER V: ACADEMIC YEAR 2019-20

Course Code and title BA 503: Financial Analytics

Credits 3
Term and Year V Term, 2019-20
Course Pre-requisite(s) Basic courses in Business Analytics and R
Course Requirement(s) Basic concepts of statistics
Course Schedule (day and time of class)
Classroom # (Location)
Course Instructor
Course Instructor Email
Course Instructor Phone (Office)
Student Consultation Hours
Office location

INTRODUCTION TO THE COURSE

This course is divided into two parts. In the first part, we will learn the basics of how to use R
language for statistical programming, computation, graphics, simulation, and modeling. R
language is increasingly becoming the leading language in data analytics and statistics. Today, R
is the tool of choice for data science professionals in every field across all industries. R is a free,
open-source, easy to use tool for programming in R language. Using R is very easy, even for
nonprogrammers. We will start with a basic introduction to the R language, reading and writing
data, and graphics. We will then discuss writing functions in R and programming in R. In the
second part of the course, we will focus on using R to fit some important econometric models,
including linear regression. We will also discuss the methods of econometrics and their
application to financial data. We focus on the empirical techniques which are mostly used in the
analysis of financial markets and how they are applied to actual real-world data in standard
computer packages. This course will cover the topics like classic linear regression model,
modeling and forecasting of stock prices and asset returns, tests of market efficiency, modeling
volatility, and analysis of high-frequency data.

COURSE OBJECTIVES

At the end of this course you would be able to:

 • Understand the types of data in R
• Differentiate between vector, matrix, data frame, and List objects  Understand how to
do simulation or bootstrapping?
• Use R for statistical programming, computation, graphics, and modeling
• Fit some basic types of statistical models
• Implement simple algorithms in R independently
• Understand Classic Linear Regression Model and Multiple Regression Models
• Grasp on Univariate time series modeling and forecasting
• Grasp on multivariate time series modeling and forecasting
• Modeling and forecasting volatility of stock prices and returns
• Analysis of high-frequency data

TEXTBOOK, COURSE PACKAGE, AND OTHER READINGS

There is no specific textbook for the first part of the course, though there are many optional texts
available for students to refer to. There are many online courses and YouTube videos, which
may help you for a better understanding of the contents of the course. All the data, slides, or
notes would be provided before each class. If something is not clear to you, please don’t hesitate
to ask.

The required textbook for the second part of the course is Introductory econometrics for
finance, 2nd Edition, Cambridge university press by Chris Brooks. Chapters from this book
are assigned as required readings in the class schedule below. I will assume that you have done
those readings when you come to the class.

REFERENCE BOOKS:

• Gujarati, D. N., Porter, D.C., and Gunasekar, S. (2012). Basic econometrics (Fifth Edition).
New York: Tata McGraw-Hill Education.
• Greene, W. H. (2003). Econometric analysis. 5th ed., Prentice Hall.
• Maddala, G. S. (2001). Introduction to econometrics. 3rd ed., Wiley.

TENTATIVE TOPIC-WISE SESSION-PLAN (24 Sessions of 75-minutes duration):

Session Topics to be covered in the session Readings
1-2 Introduction to the R and R Studio: R Scripts practice
• The layout and the interface of R Studio (Email)
• Types of data in R
• Difference between vector, matrix, data frame, factor,
and list objects
 • Generate variables in R
• Arithmetic and matrix operations
• Import and export data
• Merging data across data sources
• Introduction to functions
• Using the help facility

3 Data Manipulation/Cleaning in R (Subsetting and Sorting) R Scripts practice

(Email)
4 Graphics in R: R Scripts practice
• Basic plotting (Pie chart, line chart) (Email)
• Manipulating the plotting window (Customization of
graphs)
• Saving plots
5-6 Basic Statistics with R: R Scripts practice
• Frequency tables (Email)
• Measures of central tendency
• Dispersion
• Correlation
• Bivariate linear regression and diagnostic checking
7 Hypothesis testing and confidence intervals: R Scripts practice
• t-test (one and two sample) (Email)
• z-test
8-9 Advanced topics: R Scripts practice
• Sampling and Resampling (Email)
• Conditions and Loops (If, for, and while)
• User-defined functions
10 Monte-Carlo simulation and Bootstrapping R Scripts practice
(Email)
11-13 Introduction to Econometrics: Chapter 1 and 2
• Overview
• Regression versus correlation versus causation
• Standard Classic Linear Regression Model
• The assumptions underlying the classical linear
regression model
• Properties of the OLS estimator
• An introduction to statistical inference
14 Multiple Regression Models Chapter 3
 15-18 Classical linear regression model assumptions and diagnostic Chapter 4
tests:
• Assumption of Independence (IID)
• Multicollinearity
• Constant Variance (no heteroscedasticity)
• No Autocorrelation
• Normality
19-20 Univariate time series modelling and forecasting: Chapter 5
• Stationary and Non-stationary Time Series
• Autoregressive processes
• Moving average processes
• The partial autocorrelation function
• ARMA processes
• Building ARMA models: The Box--Jenkins approach
• Constructing ARMA models in R
• Examples of time series modelling in finance
• Modeling and forecasting of stock prices and asset
returns
• Tests of market efficiency
• Forecasting in econometrics

21 Multivariate time series modelling and forecasting (VAR Chapter 6

models)
22-23 Modelling volatility: Chapter 8
• Historical volatility
• Exponentially weighted moving average models
• Autoregressive conditionally heteroscedastic (ARCH)
models
• Generalized ARCH (GARCH) models
24 Analysis of high-frequency data R Scripts practice
(Email)

Time budgeting in course planning:

Please note that while assigning activities and planning teaching schedules following table may
be of help. The weightage of items in the table is prescriptive and may vary according to course
requirement. Yet it is indicative of how student time per course can be budgeted:
Time
Activity Description
Budgeted
Classes 2-3 hours per week for 12 weeks 30 hours
 Reading Prescribed readings and making notes 10 hours
Preparation of assignments Including shared and group exercises 20 hours
Preparation of project work Reading and writing 20 hours
Study and revision for test and end
Self-preparations 20 hours
of Trimester examination
TOTAL 100 hours

RUBRICS FOR ASSESSMENT COMPONENT

RUBRICS FOR QUIZ (10 Marks)

Criteria Below Expectations Meets Expectations Exceeds Expectations

<35% 35% - 70% >70%

A very few of the Some of the concepts Majority of concepts Most of concepts are
concepts are clear and are clear and are clear and clear and understood
student is unable to understood by student. understood by by the student.
understand the same. student.

RUBRICS FOR ASSIGNMENT

Criteria Below Expectations Meets Exceeds Expectations
Expectations
<35% >70%
35% - 70%

Defining the Not able to define the econometrics Somewhat able to Defined econometrics
econometrics problem properly define the problem correctly
problem clearly econometrics
problem

Estimation of Not able to test correctly Somewhat able to Able to test correctly
regression test
equation
Suggesting the Not able to suggest diagnostic Somewhat able to Able to suggest proper
diagnostic procedure for assumptions suggest diagnostic procedure for
procedure for diagnostic assumptions
assumptions of procedure for
regression assumptions
analysis

Interpretation of Not able to interpret the regression Somewhat able to Able to interpret the
regression output interpret the regression output
output regression output clearly.

RUBRICS FOR PROJECT

Criteria Below Expectations Meets Exceeds Expectations
Expectations
<35% >70%
35% - 70%

Defining the Not able to define the research Somewhat able to Able to define research
research problem problem define the problem correctly
correctly research problem

Usage of Not able to use appropriate data for Somewhat able to Able to use appropriate
Appropriate data analysis use appropriate data for analysis
data for analysis

Analysis of Not able to analyze econometric Somewhat able to Able to analyze

econometric model analyze econometric model
models econometric
model
Preparation of Not able to prepare and present the Somewhat able to Able to prepare and
Results and results clearly prepare and present the results
Presentation of present the results clearly
Report clearly

RUBRICS FOR END TERM (40 Marks)

Criteria Below Meets Exceeds
Expectations Expectations Expectations
<35% >70%
35% - 70%

Concepts related to A few of the Many of the Most of

Assumptions and concepts are concepts are concepts are
Diagnostic and fitting clear and clear and clear and
of appropriate Model. understood by understood by understood by
student. student. the student.

Institute’s Policy Statements

The student is required to have a clear comprehension of the specific details included in this
document. This course requires a significant commitment in and outside classroom. The
learning tasks in this course include class discussions, exercises & problems and self-study. In
addition, students are required to complete the various assignments/projects.

LMS-Moodle/Impartus

LMS-Moodle/Impartus is used to host course resources for all courses. Students can download
lecture, additional reading materials, and tutorial notes to support class participation.

Late Submission
Assessment tasks submitted after the due date, without prior approval/arrangement, will be not be
accepted. Requests for extension of time must be made with the faculty member concerned and
based on Special Consideration guidelines.
Plagiarism

Plagiarism is looked at as the presentation of the expressed thought or work of another person as
though it is one's own without properly acknowledging that person.
Cases of plagiarism will be dealt with according to Plagiarism Policy of the institute. It is
advisable that students should read Section …. Of Student Handbook for detailed guidelines. It is
also advisable that students must not allow other students to copy their work and must take care
to safeguard against this happening. In cases of copying, normally all students involved will be
penalized equally; an exception can be made if a student can demonstrate the work as their own
and reasonable care was exercised to safeguard against copying.