SemesterSpring Semester, 2021
DepartmentPhD Program of Finance, First Year
Course NameSeminar on Financial Econometrics
InstructorCHEN HONG-YI
Course TypeRequired
Course Objective
Course Description
Course Schedule

Term Project

  1. Please select a research paper published in one of the leading finance journals (Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis).

  2. Please collect data from the database and replicate all tables in the selected paper.

  3. Please compare the results shown in the paper and your results and discuss potential problems if they are different.

* Students can choose replicated papers on their own. I will verify the papers in Meeting 10.

 Schedule of the Course:

Note: I will adjust this schedule to meet the needs of the class. Please refer to the e-Learning (WM5) for scheduling updates.

  1. Meeting 1 

  • Course Overview

  • Lecture: Ordinary Least Square, Maxima Likelihood Estimation, and Generalize Least Square (1)

  1. Meeting 2 

  • Lecture: Ordinary Least Square, Maxima Likelihood Estimation, and Generalize Least Square (2)

  1. Meeting 3 

  • Lecture: Ordinary Least Square, Maxima Likelihood Estimation, and Generalize Least Square (3)

  1. Meeting 4 

  • Lecture: Capital Asset Pricing Model How to test CAPM?

  • Paper 1: Fama, E. F and J. D. MacBeth, 1973. Risk, return, and equilibrium: Empirical tests. Journal of Political Economy 81, 607636.

  • Lecture: Capital Asset Pricing Model Problems in CAPM tests

  1. Meeting 5 

  • Paper 2: Kim, D., 1995. The errors in the variables problem in the crosssection of expected stock returns. Journal of Finance 50, 16051634.

  • Paper 3: Kim, D., 1997. A reexamine of firm size, bookto-market, and earnings price in the cross-section of expected stock returns. Journal of Financial and Quantitative Analysis 32, 463489.

  • SAS program 1: Basic commends

  1. Meeting 6 

  • Lecture: Factor Models Pricing factors (Arbitrage pricing theory)

  • Paper 4: Fama, E. F. and K. R. French, 1992. The crosssection of expected stock returns. Journal of Finance 47, 427465.

  • Paper 5: Fama, E. F. and K. R. French, 1993. Common risk factors in the returns on stocks and bonds. Journal of Finance 33, 356.

  1. Meeting 7 

  • Paper 6: Fama, E. F. and K. R. French, 2015. A fivefactor asset pricing model. Journal of Financial Economics 116, 122.

  • Paper 7: Jegadeesh, N., J. Noh, K. Pukthuanthong, R. Roll, and J. Wang, 2019. Empirical tests of asset pricing models with individual assets: Resolving the errorsin-variables bias in risk premium estimation. Journal of Financial Economics, forthcoming.

  • Lecture: Fama & French 3factor model and Fama & French 5-factor model

  1. Meeting 8 

  • Lecture: Market Efficiency Efficient market hypothesis

  • Lecture: Market Efficiency How to test efficient market hypothesis? – Event study

  • SAS program 2: Data manipulation (combining CRSP and Compustat)

  1. Meeting 9 

  • Paper 8: Ikenberry D., J. Lakonishok, and T. Vermaelen, 1995. Market underreaction to open market share repurchases. Journal of Financial Economics 39, 181208.

  • Lecture: Market Efficiency Financial anomalies

  • Lecture: Return Decomposition

  • Paper 9: Jegadeesh, N. and S. Titman, 1993. Returns to buying winners and selling losers: Implications for stock market efficiency. Journal of Finance 48, 6591.

  • SAS program 3: Event Study

  1. Meeting 10 

  • Paper 10: George, T. J., and C. Y. Hwang, 2004. The 52week high and momentum investing. Journal of Finance 59, 21452176.

  • Paper 11: Avramov, D., G. Kaplanski, and A. Subrahmanyam, 2019. Stock return predictability: New evidence from moving averages of prices and firm fundamentals. Working paper.

  • Paper 12: Da, Z., U. G. Gurun, and M. Warachka, 2014. Frog in the pan: Continuous information and momentum. Review of Financial Studies 27, 21712218.

  • SAS program 4: Data manipulation (momentum strategies)

  1. Meeting 11 

  • Replicated paper decided

  • Paper 13: Bali, T. G., N. Cakici, and R. F. Whitelaw, 2011. Maxing out: Stocks as lotteries and the crosssection of expected returns. Journal of Financial Economics 99, 427446.

  • Paper 14: Cheon Y. H., and K. H. Lee, 2018. Maxing out globally: Individualism, investor attention, and the cross section of expected stock returns. Management Science 64, 54615959.

  • Econometric Issues: Economic significance

  • SAS application 1: Standard regression coefficient, marginal effects in logit model

  1. Meeting 12 

  • Lecture: Mutual Funds Fund flows and Fund performance

  • Paper 15: Sirri E. R. and P. Tufano, 1998. Costly search and mutual fund flows. Journal of Finance 53, 15891622.

  • Paper 16: Kostovetsky, L., 2016. Whom do you trust?: Investoradvisor relationship and mutual fund flows. Review of Financial Studies 29, 898936.

  • Paper 17: Nanda, V. K., Z. J. Wang, and L. Zheng, 2009. The ABCs of mutual funds: On the introduction of multiple share classes. Journal of Financial Intermediation 18, 329361.

  1. Meeting 13 

  • Lecture: Mutual Funds – Survivorship

  • Paper 18: Jayaraman, N., A. Khorana, and E. Nelling, 2002. An analysis of the determinants and shareholder wealth effects of mutual fund managers. Journal of Finance 57, 15211551.

  • Paper 19: Zhao, X. G., 2005. Exit decisions in the US mutual fund industry. Journal of Business 78, 13651401.

  • Paper 20: Khorana, A., P. Tufano, and L. Wedge, 2007. Board structure, mergers, and shareholder wealth: A study of the mutual fund industry. Journal of Financial Economics 85, 571598.

  • SAS application 2: Peicewise linear model, quantile regression

  1. Meeting 14 

  • Lecture: Mutual Funds: Manager and investor skills

  • Paper 21: Kostovetsky, L., and J. B. Warner, 2015. You’re fired! New evidence on portfolio manager turnover and performance. Journal of Financial and Quantitative Analysis 50, 729755.

  • Paper 22: Hoberg, G., N. Kumar, and N. Prabhala, 2018. Mutual fund competition, managerial skill, and alpha persistence. Review of Financial Studies 31, 18961929.

  • Paper 23: Choi, D., B. Kahraman, and A. Mukherjee, 2016. Learning about mutual fund managers. Journal of Finance 71, 28092860.

  • SAS application 3: Censored life regression, survivorship model

  1. Meeting 15 

  • Econometric Issues: Heterogeneity, Fixed effects, clustering effects

  • Paper 24: Petersen M. A., 2009. Estimating standard errors in finance panel data sets: Comparing approaches. Review of Financial Studies 22, 435480.

  • Paper 25: Thompson, S. B., 2011. Simple formulas for standard errors that cluster by both firm and time. Journal of Financial Economics 99, 110.

  • SAS application 4: Fixed effects model, clustering effects model

  1. Meeting 16 

  • Econometric Issues: Endogeneity (2sls, exogenous shock, difference in difference)

  • Paper 26: Billett, T., J. A. Garfinkel, and M. Yu, 2017. The effect of asymmetric information on product market outcomes. Journal of Financial Economics 123, 357376.

  • Paper 27: Francis, B., I. Hasan, and Q. Wu, 2015. Professors in the boardroom and their impact on corporate governance and firm performance. Financial Management 44, 547581.

  • SAS application 5: Two stage least square (2SLS)

  1. Meeting 17 

  • Econometric Issues: Sample selection bias

  • Paper 28: Baber, W. R., S. Chen, and S. H. Kang, 2006. Stock price reaction to evidence of earnings management: Implications for supplementary financial disclosure. Review of Accounting Studies 11, 519.

  • SAS application 6: Heckman model

  1. Meeting 18 

  • Project presentation

Teaching Methods
Teaching Assistant



Class Participation             50%

Term Project                      50%

Textbook & Reference

  1. Journal papers in Journal of Finance, Journal of Financial Economics, Review of Financial Studies, and Journal of Financial & Quantitative Analysis.

  2. Cochrane, J., 2005, Asset Pricing 2nd edition, Princeton University Press.

  3. Campbell, Lo, and MacKinley, 1997, The Econometrics of Financial Markets, Princeton University Press.

  4. Lee, C. F., H. Y. Chen, and John Lee, 2019. Financial Econometrics, Mathematics, and Statistics: Theory, Method, and Application, Springer.

  5. Copeland, Thomas E. and J. Weston, 2005, Financial Theory and Corporate Policy, 4th edition, Addison-Wesley Publishing Company

  6. Bodie Z., A. Kane, and A. J. Marcus, 2014, Investments 10th edition, McGrow- Hill Irwin.

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