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- 40264 - ADVANCED ECONOMETRICS 3 ( Advanced Financial Econometrics)
   A.Y. 2013/2014 - Class: 1

Please download utilities to run Matlab codes at

Papers preceded by a * can be picked for in-class presentation. A sample presentation in ppt is here.

1. Introduction and review of key concepts: Loss functions and decision theory; forecast evaluation. [3 hours]

Lecture slides
Granger, Clive WJ, and Mark J. Machina. "Forecasting and decision theory.Handbook of Economic Forecasting 1 (2006): 81-98.
*Rossi, Barbara, and Tatevik Sekhposyan. “Understanding models’ forecasting performance.” Journal of Econometrics 164 (2011): 158-172. (Presentation here).
West, Kenneth D. "Forecast evaluation.Handbook of Economic Forecasting 1 (2006): 99-134.

2. Forecasting stock returns. [6 hours]

Lecture Slides (Part 1Part 2)
Dangl, Thomas, and Michael Halling. "Predictive regressions with time-varying coefficients." Journal of Financial Economics 106 (2012): 157-181. (Code and data here)
*Li, Jiahan and Ilias, Tsiakas. “Equity premium prediction: the role of economic and statistical constraints.” Journal of Financial Markets 36 (2017): 56-75. (Presentation here).
*Rapach, David E., Jack K. Strauss, and Guofu Zhou. "Out-of-sample equity premium prediction: Combination forecasts and links to the real economy." Review of Financial Studies 23 (2010): 821-862. (Code and data here) (Presentation here).
Rapach, David E., and Guofu Zhou. "Forecasting stock returns." Handbook of Economic Forecasting 2, no. Part A (2013): 328-383.

3. Forecasting interest rates. [6 hours]

Lecture Slides (Part 1Part 2)
*Bauer, Michael D. "Restrictions on risk prices in dynamic term structure models." Journal of Business & Economic Statistics 36 (2018): 196-211 (Presentation here).
*Bikbov, Ruslan, and Mikhail Chernov. "Monetary policy regimes and the term structure of interest rates." Journal of Econometrics 174 (2013): 27-43. (Some data and code routines here) (Presentation here).
*Coroneo, Laura, Domenico Giannone, and Michele Modugno. "Unspanned macroeconomic factors in the yield curve." Journal of Business & Economic Statistics 34 (2016): 472-485. (Code and data here) (Presentation here: part 1 part 2).
Duffee, Gregory. "Forecasting interest rates.Handbook of Economic Forecasting 2 (2013): 385-426. (Code and data here)
*Piazzesi, Monika. "Affine term structure models." Handbook of Financial Econometrics 1 (2010): 691-766. (Code and data here) (Presentation here).

Time travel: affine vs. non-affine models in past editiorns of the course here

4. Forecasting with option-implied information and conditional heteroscedasticity models [5 hours]

Lecture Slides  (Part 1, Part 2)
*Bliss, Robert R., and Nikolaos Panigirtzoglou. "Option‐implied risk aversion estimates." Journal of Finance 59 (2004): 407-446.
Christoffersen, Peter, Kris Jacobs, and Bo Young Chang. "Forecasting with option-implied information." Handbook of Economic Forecasting 2 (2013).
*Christoffersen, Peter, Kris Jacobs, Chayawat Ornthanalai, and Yintian Wang. "Option valuation with long-run and short-run volatility components." Journal of Financial Economics 90 (2008): 272-297. (Code and data here)
*Rodríguez, María José, and Esther Ruiz. "Revisiting several popular GARCH models with leverage effect: Differences and similarities." Journal of Financial Econometrics 10 (2012): 637-668.
Rosenberg, Joshua V., and Robert F. Engle. "Empirical pricing kernels." Journal of Financial Economics 64 (2002): 341-372. (Some code and data here)


5. Estimating and Forecasting Asset Prices with Macroeconomic, Structural Models [4 hours]

Lecture Slides.
*Borovička, Jaroslav, and Lars P. Hansen. “Examining macroeconomic models through the lens of asset pricing.” Journal of Econometrics 183 (2014), 67-90.
*Garcia, René, and Richard Luger. "Risk aversion, intertemporal substitution, and the term structure of interest rates." Journal of Applied Econometrics 27 (2012): 1013-1036.
*Lettau, Martin, and Sydney C. Ludvigson. "Euler equation errors." Review of Economic Dynamics 12 (2009): 255-283.
*Li, Erica, Haitao, Li, Shujing,, Wang, and Cindy, Yu. “Macroeconomic risks and asset pricing: evidence from a dynamic stochastic general equilibrium model.Management Science 65 (2019): 3585-3604.
*Ludvigson, Sydney. "Advances in consumption-based asset pricing: empirical tests." Handbook of the Economics of Finance 2 (2013).

Last update 10/03/2020