Syllabus

Contemporary Issues in Empirical Finance

Dr. Yasir Kamal IMsciences, Peshawar. April, 2013
Course Description:
What Students are expected to Learn? What are some key facts about the behavior of asset prices? Key Concepts e.g. Random Walk Hypothesis, CAPM, Efficient Market Hypothesis etc. Methodology: How have researchers tested various theoretical models in different key areas? What are the pitfalls of these research designs? Hands on exercises. Developing Reading and Writing Habits Developing conceptual notes and pagers Converting Conceptual notes, methodologies, analysis into term papers.

Evaluation of the course Monthly evaluation will be done through different take home exercises including; o Developing concept notes o Data analysis o Class participation / group discussion Final evaluation o Presentation / viva and evaluation of term paper

Contents:
Area of Study No. of Expected Papers
1. Random Walk Hypothesis (RWH) 2. RWH Applications for different macro time series

Expected Learning Outcomes

Expected Duration ( in Weeks)

1. Concept: Random Walk Hypothesis, 03 RWH and its application for financial Time Series 2. Methodologies: a. b. c. Autocorrelation function and Graphs Ljung Box Q test ADF Unit Root Test, Variance Ratio Test, Philips Perron Test. 3. Reading & Writing: 03 readings and 03 pagers 04

Evaluation 1

1. Take home examination: producing two page review of Level: your selected term paper. At least review of 03 papers. Equivalent 2. Plagiarism allowed only 18% on first check. to 01 Hour

04+02
1. 2. Market Efficiency Weak form of Market Efficiency 3. Event Studies

1. Concepts: Efficient Market Hypothesis 04 weeks (EMH) theory and practices, the

interaction of RWH & EMH, The forms of EMH, World Wide Evidences of EMH, EMH & CAPM, EMH & Fama & French 3 factor Model, EMH &Black Monday & Tuesday 2. Methodologies: a. One Sample T test b. Paired Sample T test c. ADF / PP test / VR d. Autocorrelation function and Graphs 3. Reading & Writing: 06 readings and 06

pagers

Evaluation 2

1. Take home examination: analyzing data and interpreting Level: results for selected Methodologies. 2. Plagiarism allowed only 18% on first check. Equivalent to 01 Hour

1. Market Regularities / Anomalies 2. Day of the Week Effect 3. January Effect 4. Ramadan Effect

6+2

1. Concepts: Market Regularities, Market Anomalies, different kinds of Anomalies, EMH & Market regularities, day of the week effect, December Effect, Ramdan Effect, Intra Day Effect. 2. Methodologies: a. Independent Sample T test b. ANOVA c. Kruskall Walis Test d. Post Hoc Multiple Comparison e. OLS with Dummy Variables 3. Reading & Writing: 06 readings and 06 pagers

Evaluation 3

1. Take home examination: analyzing data and interpreting results for selected Methodologies. 2. Plagiarism allowed only 18% on first check.

Level: Equivalent to 01 Hour

1. Stochastic Volatility& Forecasting of Time Series 2. ARCH-Family models

5+1

1. Concepts: Stylized facts of financial time series analysis, AR process, Homoscedascity, Hetroscedicity, forecasting conditional to variance, ARCH, GARCH, TARCH, GJR-ARCH, EGARCH. 2. Methodologies: a. ADF b. ARCH Model c. GARCH model

d. GJR-Model e. EGARCH f. TARCH

Reading & Writing: 06 readings and finalizing term paper

Evaluation 4

Term Paper Presentation or Viva Plagiarism allowed only 18% on first check.

Level: Equivalent to 02 Hour

Hands on exercise: Application of concepts through computer Simulation on Pakistani data. All the methodologies will be applied in Pakistani Case. Eviews and STATA will be used. Reading Titles Comprehensive Readings Evaluation 1
1. Random walk and breaking trend in financial series: An econometric critique of unit root tests by Abdul Rahman, Samir Saadi in the Review of Financial Economics 17 (2008) 204 212. The Random Walk Model in the Pakistani Equity Market: An Examination by Fazl Husein, PDR, PIDE, 1997 DO EXCHANGE RATES FOLLOW RANDOM WALKS? An Application of Variance-Ratio Test by ABDUL RASHID Pakistan Economic & Social Review, 2006.

Concept Covered.

Random Walk Hypothesis

2.

3.

Optional Readings

Evaluation 1

4. The Behaviour of Stock Returns in an Emerging Market: A Case Study of Pakistan by Khilji Arif, PDR, PIDE, 1993

Comprehensive Readings

Evaluation 2
1. Distribution Of Stock Returns In An Emerging Market: The Pakistani Market Author(s): FAZAL HUSAIN and JAMSHED UPPAL, 1998, Pakistan Economic & Social Review 2. MARKET EFFICIENCY IN EMERGING STOCK MARKETS: THE CASE OF DHAKA STOCKEXCHANGE (DSE) Author(s): M. Farid AhmedSource: Savings and Development, Vol. 26, No. 1 (2002), pp. 49-68 3. Stock Market Volatility and Weak-form Efficiency: Evidence from an Emerging Market Author(s): Abid Hameed, Hammad Ashraf and Rizwana Siddiqui 4. Testing Semi-strong Form Efficiency of Stock Market Author(s): Salman Syed Ali, Khalid Mustafa and Asad Zaman Source: The Pakistan Development Review, Vol. 40, No. 4. 5. The Response of Karachi Stock Exchange to Nuclear DetonationAuthor (s): Attiya Y. Javed and Ayaz AhmedSource: The Pakistan Development Review, Vol. 38, No. 4. 6. Testing Semi-strong Form Efficiency of Stock Market Author (s): Salman Syed Ali, Khalid Mustafa and Asad ZamanSource: The Pakistan Development Review, Vol. 40, No. 4

Stock Market Efficiency

Optional Readings

Evaluation 2
7. The Efficiency of Emerging Stock Markets: Empirical Evidence from the South Asian RegionAuthor(s): Arusha Cooray and Guneratne WickremasingheSource: The Journal of Developing Areas, Vol. 41, No. 1 (Fall, 2007), pp. 171-183 8. Market Volatility, Manipulation, and Regulatory Response: A Comparative Study of Bombay and Karachi Stock MarketsAuthor (s): Jamshed Y. Uppal and Inayat U. Mangla 9. Single Stock Futures Trading and Stock Price Volatility: Empirical AnalysisAuthor(s): Safi Ullah Khan and Syed Tahir HijaziSource: The Pakistan Development Review, Vol. 48, No. 4

Comprehensive Readings

Evaluation 3
1. An Investigation of the Day-of-the-Week Effect on Stock Returns in TurkeyAuthor(s): Riza Demirer and M. Baha KaranSource: Emerging Markets Finance & Trade, Vol. 38, No. 6, Turkey in the Financial Liberalization Process (II) (Nov. - Dec., 2002), pp. 47-77 The Day-of-the-Week Effect in Stock Returns: Further Evidence from Eastern European Emerging Markets. Author(s): Richard A. Ajayi, Seyed Mehdian and Mark J. PerrySource: Emerging Markets Finance & Trade, Vol. 40 Anomalies in Karachi Stock Market: Day of the Week Effect Author (s): Mohammed Nishat and Khalid MustafaSource: The Bangladesh Development Studies, Vol. 28, No. 3 A Seasonality in the Pakistani Equity Market: The Ramadhan Effect Author (s): Fazal HusainSource: The Pakistan Development Review, Vol. 37, No. 1 (Spring 1998), pp. 77-81

2.

3.

EMH Anamolies

4.

5. The January Effect in Preferred Stock

InvestmentsAuthor(s): Daniel E. Vetter and John R. WingenderSource: Quarterly Journal of Business and Economics, Vol. 35, No. 1

Optional Readings

Evaluation 3
1. An Analysis of Day-of-the-Week Effects in the Egyptian Stock Market by Hassan Alya, Seyed Mehdianb, and Mark J. Perryb Stock Market Seasonality: Day Of The Week Effect And January Effect: by Lukas Mazal 2008-2009 Seasonalities in stock markets: the Day of the Week Effect: by George Drogalas, Stergios Athianos and George Elekidis

2.

3.

Comprehensive Readings

Evaluation 4
1. Estimation of an Asymmetric Stochastic Volatility Model for Asset ReturnsAuthor(s): Andrew C. Harvey and Neil ShephardSource: Journal of Business & Economic Statistics, Vol. 14, No. 4 (Oct., 1996), pp. 429-434 2. A Multivariate GARCH Model of International Transmissions of Stock Returns and

Volatility:The Case of the United States and CanadaAuthor(s): G. Andrew KarolyiSource: Journal of Business & Economic Statistics, Vol. 13, No. 1 (Jan., 1995), pp. 11-25 3. Volatility and Links between National Stock MarketsAuthor(s): Sentana and Mervyn Sushil King, Enrique

WadhwaniSource:

Econometrica, Vol. 62, No. 4 (Jul., 1994), pp. 901-933 4. Intraday Volatility in International Stock Index

Assets Volatility Modeling

Futures

Markets:

Meteor

Showers

or

HeatWaves?Author(s): G. Geoffrey Booth, Mustafa Chowdhury, Teppo Martikainen and Yiuman TseSource: Management Science, Vol. 43, No. 11 (Nov., 1997), pp. 1564-1576 5. Corporate Disclosure Practices, Institutional Investors, and Stock Return VolatilityAuthor(s): Brian J. Bushee and Christopher F. NoeSource: Journal of Accounting Research, Vol. 38 6. Does Increased International Influence Cause Higher Stock Market Volatility?Author(s): John HasslerSource: The Scandinavian Journal of Economics, Vol. 101, No. 1 (Mar., 1999), pp. 17. The Impact of Political Risk on the Volatility of Stock Returns: The Case of CanadaAuthor(s): Marie-Claude Beaulieu, Jean-Claude Cosset and Naceur EssaddamSource: Journal of International Business Studies, Vol. 36, No. 6

Optional Readings

Evaluation 4