Economics/Finance
517–Time Series Analysis
Course: ECON 517 (W, 7:30pm-10:20pm)
Term: Spring 2006
Instructor: Garett Jones
Office hours: Alumni Hall 3132, W/Th 4-5, 6:30-7:30, and by appointment
Phone: (618) 650-2982
Email: garjone@siue.edu
Website: http://www.siue.edu/~garjone
Course Description
In this course, you will come to thoroughly understand the basics of difference equations and time series analysis, and you will apply these tools one topic each in finance (the random-walk hypothesis) and macroeconomics (the money-output relationship).
Prerequisites
Economics/Finance 415 or equivalent. I will take for granted that you have had a course at the level of Gujarati’s Basic Econometrics, Stock and Watson’s Introduction to Econometrics, or Woolridge, Introductory Econometrics.
Textbook
Walt Enders, Applied Econometric Time Series, first or second edition, Wiley.
Supplementary Texts
If you would like to have a textbook at hand that covers many of our topics at a simpler, more intuitive level, I strongly recommend Stock and Watson’s Introduction to Econometrics; they are leading time series researchers and outstanding writers.
If you would like to have a textbook at hand that covers many of our topics in much greater depth, I strongly recommend James Hamilton’s Time Series Analysis, the standard Ph.D.-level text in the field. Like Stock and Watson, Hamilton is also a leading time series researcher and an outstanding writer.
Schedule
Weeks 1-7: Chapters 1-4 of Enders
C1: Difference equations
C2: Stationary ARMA models
C3: Trends and Volatility: ARCH, GARCH, ARCH-M, and introduction to trends
C4: Testing for Trends and Unit Roots: Dickey-Fuller and structural breaks.
Week 8: Midterm Examination
Week 9: Spring Break
Weeks 10-12: Campbell, Lo, and McKinley, The Econometrics of Financial Markets, C1 and C2. I will hand out copies of these chapters before spring break.
Weeks 13-14: Vector Autoregressions (VARs): Enders, C5
Weeks 15-16: Money and Output
A small number of macro/money VAR papers will be assigned.
They will be announced before spring break.
Course Grading
Homework: 20%
Midterm: 40%
Final: 40%
You are encouraged to work on your homework assignments in groups, but you must hand in your own work. When essay or short-answer questions are required, you must do your own work. All homework must comply with the School of Business’s Fatal Error Policy.
The final will be mostly comprehensive. Later in the semester, I will clearly state which portions will be excluded.
Software
We will use EViews repeatedly in this course. It is available on computers in the business school. Further, a student version is available for $40 from www.eviews.com.
The student version will be able to all topics except the material covered in chapter 3 (ARCH and its extensions) and in weeks 13-16 (i.e., chapter 5’s VAR material). For those weeks, the campus computers will be the only practical tool for completing many assignments.
Academic Honesty
All forms of academic dishonesty are strictly forbidden. The minimum punishment for cheating in any form is an F for the semester.
Fatal Errors Policy
The following policy was approved by the SIUE School of Business at its faculty meeting on November 13, 1995:
The School of Business adopts a "fatal errors" policy which includes technical English errors and errors of form, including the following:
a. each different word misspelled;
b. sentence fragments;
c. run-on sentences and comma splices;
d. mistakes in capitalization;
e. serious errors in punctuation that would inhibit understanding;
f. errors in verb tense or subject and verb agreement;
g. lack of conformity with assignment format;
h. other serious grammatical errors; and
i. improper citation.
Papers with more than three fatal errors marked by the instructor on any page or more than a number specified by the instructor for the entire document will be returned to the student and subject to a grading penalty as prescribed by the instructor. Instructors will determine the number of resubmissions allowed and the penalty attached to each resubmission. Penalties for final course papers (where there is no time for resubmission) will be determined by the instructor and will be based on the relative importance of the assignment to the determination of the final course grade.
The above policy applies to all 200-level and above business courses. The policy is optional for instructors teaching courses at the 100-level unless the proposed 35 student maximum in 111 classes is adopted by the Faculty Senate.
Rationale: The above policy is part of an expectation on the part of the faculty that students acquiring a degree in business must be able to communicate effectively. The fatal error policy, then, is part of the process of developing appropriate written communications skills among our business students. It is the judgment of this faculty that communication skills rank among those skills that are required of employees to be successful in the workplace. In order for students to develop such skills, they must be made aware that a basic level of written proficiency is required to graduate from our business program.