ORF 504/Fin 504:  Financial Econometrics

Spring Semester, 2013
MW 9:30 - 10:50 in 103 Bendheim Center for Finance
Home page: http://orfe.princeton.edu/~jqfan/

General Information
Text Book
R Examples



Instructor. Jianqing Fan, Frederick L. Moore'18 Professor of Finance. Office: 102 BCF and 106 Sherred Hall.  Phone: 258-7924. E-mail: jqfan@princeton.edu

Office Hours: Monday: 3:00pm--4:00 pm, Wednesday 4:00pm -- 5:00pm at 102 BCF, or by appointments.

Precept: Arranged periodically by the AI

Assistants in Instruction (AIs):

  • Weichen Wang weichenw@princeton.edu, 258-4660, Office:  220 Sherred Hall    
    Office Hours:  
    Tuesday,  3:00--4:00pm and Thursday, 3:00-4:00pm
  • Financial Econometric Lab, 222 Sherred Hall, 258-9433,
    Statistics Lab, 213 Sherred Hall, 258-8787


Text Book: J. Fan and Q. Yao (2015). The Elements of Financial Econometrics, Scientific Press.
Lectures are primarily based on the lecture notes and text book with the following references.

Reference Books:

  • J.Y. Campbell, A.W. Lo and A.C. MacKinlay (1997): The Econometrics of Financial Markets, Princeton University Press
  • Fan, J. and Yao, Q. (2003). Nonlinear Time Series: Parametric and Nonparametric Methods. Springer.
  • Tsay, R.S. (2010). Analysis of Financial Time Series (Third edition), John Wiley & Sons.
  • Zivot, E. and Wang, J. (2006). Modeling Financial Time Series with S-PLUS (2nd ed.), Springer, New York.

Syllabus: This course covers econometric and statistical methods as applied to finance. Topics include

  • Asset returns and efficient markets
  • Linear time series and dynamics of returns
  • Discrete time volatility models of returns
  • Multivariate time series and volatility*
  • Efficient portolios and CAPM
  • Multifactor pricing models
  • Portfolio allocation and risk assessment
  • Comsumption-based CAPM
  • Present value models
  • Simulation methods for financial derivatives
  • Econometrics of continuous time finance
  • Forecast and management of market risks*
  • Nonparametric methods in financial econometrics*

Computation: It will be very useful to have a pocket calculator. The calculators will be used during the exams. The software package for this class is R. See R-labs below

Attendance: Attendance of the class is required and essential.  The course materials are mainly from the notes.  Many conceptual issues and financial econometrics thinking are only taught in the class. They will appear in the midterm and final exams.


Homework: Problems will be assigned at class meetings. No late homework will be accepted (120 Sherred Hall has an In-Out box for the class). Missed homework will receive a grade of zero. The homework will be graded, and each assignment carries equal weight. You are allowed to work with other students on the homework problems, however, verbatim copying of homework is absolutely forbidden. Therefore each student must ultimately produce his or her own homework to be handed in and graded.

Exams: There will be one in-class midterm exam, and a final exam. All exams are required and there will be no make-up exams. Missed exams will receive a grade of zero. All exams are open-book and open-notes. Calculators may be used during the exams.

Schedules and Grading Policy:
Homework (30%) ............................................................ Various due dates (5 sets)
Midterm Exam (23%) ........................................ Wednesday, March 25, 2015 (9:30--10:50am)
Final Exam (47%) ............................................. Thursday, May 14, 2015 (9:00am--12:00pm).


Lecture Notes 1

R labs: The following files intend to help you familiar with the use of R-lab commands.
Here are some useful materials too.
An Introduction to R, by W. N. Venables, D. M. Smith and the R Core Team.
U-Tube video: An introduction to R  


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