Lecture notes
MN20310 Empirical Finance Lecture notes
- Institution
- University Of Bath (UoB)
Lecture notes with lecturer's comments
[Show more]
Seller
Follow
Content preview
Lecture 1: Introduction and Descriptive statisticsTypes of data
1. Cross-sectional data
2. Time series data
3. Panel data, a combination of 1 & 2
—
Cross-sectional data
Are data of individuals, rms, households, cities, states, countries, or other units of interest at a
single point of time/in a given period
They are more or less independent
Examples:
- a list of grades scored by a class of student on a
particular test
- A list of daily returns for a speci c date of stocks on
the New York Stock Exchange
- A sample of bond credit ratings for UK banks in
2021
Representative cross-sectional data are obtained by
random sampling from the underlying population
—
Time series data
Are observations of a variable or several variable over time
They are typically serially correlated
Examples:
Series
GDP or unemployment
Government budget de cit
Money Supply
Value of stock market index
Frequency
Monthly, or quarterly
Weekly
Annually
As transactions occur
1
fi fi
, Panel or longitudinal data
The same cross-sectional units are followed over time
Panel data have a cross-sectional and time
series dimension
- Used to account for time-invariant
unobservables
- Used to model lagged responses
—
Frequency distributions
A tabular display of data summarised into intervals is known as a frequency distribution.
Histograms
are the graphical representation of a frequency distribution.
Probability density function (pdf)
is a statistical expression that de nes a probability distribution (the likelihood of an outcome) for a
discrete random variable (e.g., a stock)
As sample becomes larger the histogram approaches the pdf
Descriptive Statistic
scribe, or summarize, data in ways that are meaningful and useful
Kurtosis
Distributions are referred to as being
1. Leptokurtic (+): positive excessive kurtosis
(more peaked than the normal; More
observations closer to the mean and out in the
tails; fatter tails)
2. Platykurtic (-): negative excessive kurtosis
(less peaked than the normal; more evenly
distributed across the range of possible
values; thinner tails)
3. Mesokurtic (0): zero excessive kurtosis
(equivalent to the normal distribution).
2
fi
,Covariance and correlation are both measures of the extent to which two random variables move
together
3
, Simple and log returns
Advantages of using log returns
- they can be interpreted as continuously compounded
returns
- Can add them up, e.g. if we want a weekly return and
we have calculated daily log returns:
Disadvantage:
4
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller eztalye777. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £7.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
57413 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now