Research Methods in Finance

Section 2
Lecture # 1
June 27, 2012
Recommended Books:

1. Applied Econometrics by Asterio

2. Financial Econometrics by Fabozi

Topics in Research Methods in Finance: (Syllabus)

1. Multivariate Regression
a. Omitted variable case
b. Autocorrelation
c. Multicollineraity
d. Heteroscedasticity
e. Functional Specification

We will respond five questions in each of above case:

1. What is ………..(suppose Heteroscedasticity)

2. How to detect Heteroscedasticity
3. In the presence of Heteroscedasticity, running the regression what will be the effects….
4. What are the techniques for the removal of the problem
5. What are the alternative techniques to deal with Heteroscedasticity

2. Dummy
3. ARCH (Autoregressive conditional Heteroscedasticity) GARCH (Generalized Autoregressive
conditional Heteroscedasticity) Complete family will be discussed
4. Panel Data Analysis
a. Common effect model
b. Fixed effect model
c. Random effect model
5. Event study Methods
6. Cointegration Analysis
a. JJ Approach
b. ARDL Approach
7. Quintile Regression
8. GMM (Generalized Method of Movement)
 Two Important Points:

i) Conceptualization
ii) Operationlization

 Research Process:

Research Process
Economic Theory

Econometric Model

Estimation of Model
Five Test:
1. Autocorrelation
2. Heteroscedasticity
Diagnostic Testing
3. Multicollineraity
4. Omitted Variable Case
No 5. Functional Specification
Conditions Fulfilled or not

Yes

Hypothesis Testing

 Types of Data:

o Time series Data

o Cross Sectional Data
o Panel Data
  Basic Handling of Data:
o Draw Graph for basic outlook or pattern
o Descriptive Statistics
 Mean
 Median
 Mode
 Standard Deviation
 Max
 Min
 Skewness
 Kurtosis

 Transformation of Data:
o Log
o Growth
o Real vs. Nominal
o Continuous vs Discrete
o Rebasing
o Indices

Coordinator:

Abdul Qadeer Khan

(Research Associate)
Office: 051-4486701 Ext: 212
Cell: 0333-6487274
dr.aqkhan@live.com

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