Course Details

Applied Time Series

Course Title: Applied Time Series Finance
Course Code: ECO-320
Program: BS A&F 2K17
Prerequisite: Statistics; Econometrics
Credit Hours: 3
Sections: A and B

Finance
Course Faculty
Dr. Rehman U. Mian

Office: 220 NBS (first floor), NBS

Office Hours: Monday-Friday: 9AM – 5PM
Tel: 051- 90853161
Email: r.mian@nbs.nust.edu.pk

Course Description
The purpose of this course is to develop an understanding of principal techniques in financial
data analyses with an emphasis on time-series, cross-sectional, and panel data analyses.
Furthermore, this course aims to facilitate awareness in students of how these techniques can
be used and applied to real financial data, including the return forecasting, modelling time
varying volatility, valuation, and modelling relationships among financial series. The course is
divided into the following three parts to clearly provide the necessary knowledge and
background to carry out own financial data analyses/research, as well as to understand and
critically assess empirical findings reported in financial literature:

1. Data acquisition and management

2. Descriptive analysis
3. Inferential analysis

Although the applications and motivations of this course are drawn from finance, it may also
Department
prove to be usefulof
forFinance & such
other disciplines Investment
as management studies, business studies,
economics and other relevant streams. While time series modelling techniques will be
considered in detail, other econometric methods such as panel data analysis will also be
considered. Please note that heavy emphasis will be given to fundamental concepts and applied
work.
NUST Business School
Course Learning
National Outcomes
University of Sciences & Technology
Upon successful completion of the requirements for this course , students will be able
to:

BS A&F 2K-
 1. Identify and solve problems related to financial data.
2. Develop fundamental analytical and research skills (such as data collection, data
processing, and model estimation & interpretation).
3. Effective usage, interpretation, and presentation of financial data/results.
4. Understand and critically evaluate models used in financial forecasting.
5. Identify the appropriate time series model for a given data series.
6. Evaluate the accuracy of predictions using various metrics.
7. Estimate time series models and produce reliable forecasts.
8. Explain the relative advantages and disadvantages of VAR modelling
9. Construct Vector Autoregressive Models.
10. Produce various models and forecasts from the GARCH family.
11. Describe the key features of panel data and outline the advantages and disadvantages
of working with panel data.
12. Determining the appropriateness of models in particular cases.

Undergraduate Program Learning Goals and Objectives

General Learning Goals & Objectives BSAF Program

1. Provide an in-depth knowledge of principal methods and techniques of accounting

and financial management.
2. Instill a structured approach in students to effectively deal with complex business
issues.
3. Prepare students for the role of accounting/ finance professionals who can add
value to all areas of organization.
4. Enhance interpersonal, team building, communication and leadership skills.
5. Incorporate a sense of professional ethics and responsibility.
6. Provide hands on training in different soft wares in accounting and finance.
7. Enter into collaborative arrangements with various local and international
accounting and finance bodies.

Required Course Material

Reading Material:
Brooks, C. (2008), Introductory Econometrics for Finance, Cambridge University Press.

2
Chatfield, C. (2005), The Analysis of Time Series: An Introduction, Chapman & Hall/CRC.
Chan, N. H. (2002), Time Series: Applications to Finance, Wiley & Sons, Inc., Publication.
Tsay, R. S. (2005), Analysis of Financial Time Series, Wiley & Sons, Inc., Publication.

Course Evaluation (Grade Breakup)

The breakup of the grade points is as follows:

Final Exam                        40%

Mid Semester Exam       25%
Assignments 10%
Quizzes 10%
Final Project 10%
Class Participation 05%

Course Content (Weekly)

Weekly breakdown is given below
Session Outcomes
Week Lecture No. and Topic Reading (Students should be able
to…)
CLO # 1 & 2
1. An overview of the course IEF Chapter 01
1 2. Types of financial data (optional)
3. Sources of financial data

1. How to efficiently tackle

problems associated with raw
financial data
2. What are outliers and how to Introduction to
2 CLO # 1 & 2
deal with them Econometrics/Statistics
3. Descriptive analysis of financial
data

3 1. Introduction to STATA IES Chapter 02; IES CLO # 3

2. Linear regression models Chapter 03 and 04
3. Time series (optional)
4. Cross-sectional
5. Panel
6. Multiple regression analysis
7. Overview of multiple

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 regression models
8. Control variables
9. Dummy variables
10. Multicollinearity and how to
deal with it
11. Endogeneity and how to
control it

1. Time series modelling

i. Components of time
series data
ii. Introduction to
univariate and
multivariate time series
modeling
2. Univariate time series
modeling
i. Autoregressive processes (AR) IES Chapter 05
4 CLO # 3, 4, & 5
ii. Moving average processes
(MA)
iii. Autocorrelation function (ACF)
iv. The partial autocorrelation
function (PACF)
v. ARMA processes
vi. ARIMA processes
vii. SARIMA processes

5 1. Univariate time series IES Chapter 05 CLO # 3, 4, & 5

modeling and analysis
i. Introduction to Box-Jenkins
method (model identification,
model estimation, model
diagnostics)
ii. Stationarity and unit root
testing
iii. Detecting seasonality
iv. Residual calculation

4
 2. Time series analysis in STATA
i. Formatting and managing
the time variable
ii. Plotting
Time series operators
1. Dealing with time series data
types in STATA
i. How to convert daily data
in monthly
ii. Converting daily data into
weekly
iii. From daily to quarterly and IES Chapter 05; Class
6
annual data type notes

2. Forecasting
i. In-sample forecasting
ii. Out-of-sample forecasting
iii. Dynamic forecasting

1. Application of Box-Jenkins
(forecasting stock returns) IES Chapter 05; Class
7 i. ARIMA model notes CLO # 3, 4, 5, 6 & 7
ii. SARIMA model

8 Lab Exercises CLO # 3, 4, 5, 6 & 7

9 MID-TERM EXAM WEEK

Multivariate time series models (part
10 IEF Chapter 06 CLO # 8 & 9
I)
Multivariate time series models (part
11 IEF Chapter 06 CLO # 8 & 9
II)
Modelling long-run relationships in
12 IEF Chapter 07 CLO # 7
finance
Modelling volatility and correlation
13 IEF Chapter 08 CLO # 10
(part I)
Modelling volatility and correlation
14 IEF Chapter 08 CLO # 10
(part II)
15 Panel data analysis IEF Chapter 10 CLO # 11 & 12
16 Limited dependent variable models IEF Chapter 11 CLO 13 & 14
17 BUFFER WEEK
18 FINAL EXAM WEEK

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Class Participation
The students are encouraged and invited to participate actively in class discussion and activities. It is
advised that you discuss your ideas and experiences with regard to how they relate to the concepts
discussed in the class. Please note that your in-class participation will be closely monitored throughout
the semester. Also, it is advised not to argue for the sake of argument; reflect and analyze the
information given to you, think critically!
Attendance:
 If you are absent, please ask a classmate for any missed course material or assignments.
 Class attendance will be taken in first 5-10 minutes of the class. Anyone coming afterwards will
be marked absent for that session.
Assignments:
 Please submit all your assignments via email unless told otherwise. This is to check the
submissions for plagiarism through plagiarism software.
 All assignments should be submitted by 17:00 hours on the due date. Any late submissions will
not be marked.
Make-ups:
There will be no make-ups for assignments, presentations and quizzes under any circumstances.

Academic Dishonesty:
You are responsible for knowing and enacting academic conduct that is in line with the University’s
statement entitled “Academic Dishonesty” available at:
http://www.nust.edu.pk/usr/showContents.aspx?mdl=1839
The statement highlights examples of unacceptable behavior which include, but are not limited to, the
following:
 Cheating: Intentionally using or attempting to use unauthorized materials, information, or study
aids in any academic exercise; copying from another student’s examination; submitting work
prepared in advance for an in-class examination; taking an examination for another person or
conspiring to do so.
 Plagiarism: Intentionally or knowingly representing the words or ideas of another as one’s own
in any academic exercise; failure to attribute direct quotation, paraphrase, or borrowed facts or
information.
It is expected that all work that is handed will be your own.  Any ideas or content that come from
another source must be properly cited (including any content taken from the Internet, books, articles
and lectures). A handout ‘How to Avoid Plagiarism’ is provided to you along with this course outline. It
is expected from you that all your work (project, assignment and presentations) are referenced using
this handout.
Moreover, TurnItIn will be used as the plagiarism software to evaluate all your submissions. Any acts
of plagiarism and cheating will be dealt strictly and in accordance with the policy in place by the
University.