The Single Index Model
Testing Portfolio Efciency
Linear Models For Equity Return Processes
MFIN6201
Dr. Konark Saxena1
1 Australian
School of Business, University of New South Wales
August 19, 2013
The Single Index Model
Testing Portfolio Efciency
The Si
Australian School of Business
School of Banking and Finance
MFIN6201
EMPIRICAL TECHNIQUES IN FINANCE
COURSE OUTLINE
SEMESTER 2, 2011
TABLE OF CONTENTS
PART A. COURSE SPECIFIC INFORMATION
1
1. STAFF CONTACT DETAILS
1
2. COURSE DETAILS
1
2.1. Teaching Times
Review Quiz Week 8
1. Assuming homoscedasticity and no correlation, how do we estimate
variance of the OLS estimator?
2. Without assuming homoscedasticity and no correlation, how do we
estimate variance of the OLS estimator?
3. How do we estimate the dist
Review Quiz Week 6
1. What is the fitted value of Y given an OLS estimators vector? Also
describe it in words.
2. What is the difference between centered and uncentered R squared?
Why are they different?
3. Describe homoskedasticity and heterskedasticity.
Review Quiz Week 5
1. Is an unbiased estimator for the variance? If not, how to correct it?
2. You have 1000 time series of a stock return and want to estimate the
volatility. What is a consistent estimator? Comment on the unbiaseness.
3. What is the rela
Review Quiz Week 4
1. What is expected value of sample average?
2. What is the difference between consistency and unbiaseness?
3. What is the BLUE of expected value? Why?
4. What is CLT?
5. What is LLN?
6. What is a least square estimator? An example?
Review Quiz Week 3
1. Show Var[Y]=bVar[X] where Y=bX
2. Show Var[X]=E[X]-(E[X])
3. Show Cov(a+bX,Y)=bCov(X,Y).
4. What is the expected return on Virgin Australia given that the market is
up?
VA return = -0.1
VA return = 0.1
Market up
0.1
0.3
Market down
0
Review Quiz Week 2
1. Calculate
AB where A= and B=.
2. Calculate
AB where A= and B=.
3. Calculate
Inverse of A where A=
4. Explain why we need to study matrix algebra for econometrics.
5. What kind matrices should be multiplied together to obtain a scalar
State No. State of the economy
1 Depression
2 Recession
3 Normal
4 Good
5 Boom
Mean
Probability of Loss
Variance
Standard Deviation
Covariance (wrt Market)
Correlation (wrt Market)
Beta (wrt Market)
Probability
0.05
0.2
0.45
0.2
0.1
Market
High Tech
Govt.
Data Analysis - Random Sampling
http:/cameron.econ.ucdavis.edu/excel/ex01access.html
http:/www.bettersolutions.com/default.aspx
ADDING-IN THE DATA ANALYSIS TOOLPACK TO EXCEL
Statistical analysis such as descriptive statistics and regression requires the E
FINS1613
Business Finance
Week 12
CAPM, Cost of Capital, Capital Structure
Agenda
CAPM
Market Efficiency
Risk and Return
Portfolio Diversification
Beta and CAPM
Cost of Capital
Weighted Average Cost of Capital (WACC)
Hamadas Equation
Capital Structur
FINS1613
Business Finance
Week 12
CAPM, Cost of Capital, Capital Structure
Agenda
CAPM
Market Efficiency
Risk and Return
Portfolio Diversification
Beta and CAPM
Cost of Capital
Weighted Average Cost of Capital (WACC)
Hamadas Equation
Capital Structur
Your projected income statement shows sales of $992 000, cost of goods sold as $478 000,
depreciation expense of $105 000 and taxes of $ 122 700 due to a tax rate of 30%. What are your
projected earnings? What is your projected free cash ow?
Complete the
FINS1613
Business Finance
Week 5
Debt
Agenda
Capital Structure
Debt
Bond terminology
Bond Valuation
Bond Relationships
Inflation and Interest Rates
Term Structure of Interest Rates
Sally Qin
2
Capital Structure
The proportion of debt, equity and other s
Panel Data: What and Why
(SW Section 10.1)
A panel dataset contains observations on multiple entities
(individuals, states, companies), where each entity is
observed at two or more points in time.
Hypothetical examples:
Data on 420 California school dist
This subject requires a certain degree of fluency with basic results that underlie econometic
analysis. Some of these results require practice to understand, more than simply listening in
class. I recommend at least trying the following questions to make
Macro News Moves the Market
Change in interest rates
Empirical Methods and Techniques in
Finance
Konark
1 Australian
Saxena1
School of Business, University of New South Wales
Change in employment rates
Change in investor condence
Change in ination expecta
Macro News Moves the Market
Change in interest rates
Emperical Methods and Techniques in
Finance
Konark
1 Australian
Saxena1
School of Business, University of New South Wales
Change in employment rates
Change in investor condence
Change in ination expecta
8/25/13
Chapter 14
Introduction
to Time Series
Regression and
Forecasting
Time Series Data: Whats Different?
Time series data are data collected on the same
observational unit at multiple time periods
Aggregate consumption and GDP for a country (for
exam
Testing Portfolio Efciency
Testing Portfolio Efciency
Outline
Time Series and Cross Sectional
Regressions
The Fama-MacBeth Procedure
1
Testing Portfolio Efciency
Dr. Konark Saxena1
1 Australian
School of Business, University of New South Wales
September 6