Spring Quarter 2011

Business 41202: Analysis of Financial Time Series

Instructor: Ruey S. Tsay

Phone: 773-702-6750

Fax: 773-702-0458 (Please put my name on the cover
page)

Office HPC: 455

Lecture:

Bus 41202-01: Tuesdays 8:30 am to 11:30 am at C04, Harper Center

Bus 41202-85: Tuesdays 6:00 pm to 9:00 pm at Room 203, Gleacher Center

Teaching Assistant: Mr. Samir Warty

e-mail: swarty@chicagobooth.edu

(e-mail is the easiest way to contact TA)

Review Sessions:

BS41202-01: Mondays 12:00 noon to 1:00 pm at C05, Harper Center. (Starts from Week 2.)

BS41202-85: Tuesdays 5:10 pm to 5:50 pm at Room 203, Gleacher Center, but the review will be held in Room 604 on May 10.

Syllabus of the course.

Course materials

Text: Analysis of Financial Time Series,
3rd Edition

Ruey S. Tsay,
Wiley, 2010.

ISBN:
0-470-41435-4

Data sets:

http://faculty.chicagogsb.edu/ruey.tsay/teaching/fts3/

or additional datasets will be posted for lectures and homework
assignments.

Lecture Notes:
posted a week before lecture.

Week 1: Lecture & Data sets used: d-aapl0009.txt, d-useu.txt, m-ibm6708.txt, m-sp2609.txt, m-tb3ms.txt,

m-tb6ms.txt, q-ko-earns8309.txt, vix9009.txt , norwegianfire.txt,

Week 2: Lecture & Data sets used: dgnp82.txt, m-unrate.txt (include 2010 data), d-ibmvwew6202.txt, q-gdpc96.txt

A special package for R: coolpackage

Week 3: Lecture & Data sets used: m-housing-starts, q-earn-jnj.txt, q-earn-fdx.txt, w-gs1n36299.txt

Week 4: Lecture & Data sets used: m-intc7303.txt, sp500.txt

Week 5: Lecture & Data set used: m-ibm2609.txt

Week 6: Lecture & Data set used: d-sp55010.txt (in reverse time order)

Week 7: Lecture & Data sets used: m-ibm6708.txt, ibm91-ads.txt, ibm91-adsx.txt, m-gmsp6708.txt

Week 8: Lecture

Week 9: Lecture & Data set: d-ibmln98.txt

Week 10: Lecture & Data sets used: d-bhp0206.txt, d-vale0206.txt

Computing:

The main package used is R, which is free
from R-Project for Statistical Computing.

The most recent version of R is R2.12.2

The following
packages are needed in R:

(fBasics,
fGarch, quantmod, fUtilities, fUnitRoots, timeSeries,
nnet, evir, urca, mAr)

[In fact, you may want to install the complete package Rmetrics. This can be done in R using

the following two commands:

source("http://www.rmetrics.org/Rmetrics.R")

install.Rmetrics()
]

[* Students may use other packages or programs if they prefer. *]

R Installation:

Instructions
for download R:

1. Download R here. [Click CRAN to select a mirror site.]

Instructions
for running R on PC. R-start

Demonstration: in class

R commands used in lectures:

Week 1: Rcommands_lec1.txt

Week 2: Rcommands_lec2.txt

Week 3: Rcommands_lec3.txt

Week 4: Rcommands_lec4.txt

Week 5: Rcommands_lec5.txt

Week 6: Rcommands_lec6.txt

Week 7: Rcommands_lec7.txt

Week 8: Rcommands_lec8.txt

Week 9: Rcommends_lec9.txt

Week 10: Rcommands_lec10.txt

Homework :

Assignment before class: Read Chapter 1 of the textbook.

HW1: Data sets used: d-aapl3idx-0110.txt, m-xomsp-8010.txt, m-tb3ms-3411.txt, m-crspriskfree.txt

Solutions & R-commands used.

HW2: Data sets used: q-gdpc96.txt, q-gdpdef.txt, d-vix0411.txt

Solutions & R-commands used.

HW3: Data sets used: m-Starts.txt, m-deciles.txt, m-pcedspi.txt

Solutions & R-commands used.

HW4: Data sets used: m-deciles.txt, m-gesp6110.txt, d-usjp0111.txt

Solutions & R-commands used.

HW5: Data sets used: m-3msp6110.txt, mmm-taq-trade.txt

Solutions & R-commands used.

HW6: Due May 31, 2011

Solutions & R-commands used.

Office hour
: (a) Thursday: 10:30 am to 11:30 am

(b) By appointment

(c) E-mail me at any time with questions.

(This is the easiest way to reach me.)

Midterm :
Week 6. Open book and notes!

Date: Campus session: May 3

Evening session: May 3 (Two rooms are available: 203 and 226.)

Lecture after the exam.

Final Exam:
Exam week

Campus: Tuesday, June 7, 8:00 am to 11:00 am

Evening: Tuesday, June 7, 6:30 pm to 9:30 pm.

Open book and notes.

New rooms for Campus Final Exam: C05 for Section 1 & Gleacher Room 203 & 244 for Section 81.

Grading:
35% midterm + 35% final exam + 30% homework,

where the scores of midterm, final exam and homework

assignments are normalized to be out of 100.

Chicagobooth mandates a maximum class
grade point average of 3.33.

I rank the class based on the final scores using the above grading

formula and pick grade cutoffs so that I can get the highest class

GPA under the constraint.

Additional
Web Sites for data:

(a) Wharton WRDS at http://wrds.wharton.upenn.edu

(b) St Louis Fed at http://research.stlouisfed.org/fred2/

Additional R scripts:

0. Moving average plot: ma.R

1. Forecasts with specified forecast origin: fore.R & forecast plot: foreplot.R

2. Recursive out-of-sample forecasts: backtest.R

3. To estimate an IGARCH model: Igarch.R & GARCH-M program: garchM.R

4. Moving window for volatility calculation: mvwindow.R

5. Yang and Zhang's methof: yz.R

6. Recursive out-of-sample nnet forecasts: backnnet.R

7. Compute volatility of a given GARCH11 model: garch11v.R

(including IGARCH(1,1) model for RiskMetrics).

8. Multivariate Ljung-Box statistics: mq.R

9. Co-integration test: (Use urca package)

10. ACD estimation: acd.R

11. Volatility plot: volplot.R

12. High-frequency intraday log returns: hfrtn.R

13. High-frequency intraday number of transactions: hfntra.R

14. High-frequency price change and duration: hfchg.R

15. Compute VaR based on traditional EVT estimates: evtVaR.R

16. Exponentially weighted voalitlity matrices: EWMAvol.R

17. For VAR scripts, see my teaching web page for MTS.

Feedback:

Final Exam: Examand Solutions

(1) Campus: June 7, 8:00 am to 11:00 am. Room C05

(2) Evening: June 7, 6:30 pm to 9:30 pm, Gleacher 203 & 244

Old exams :

Year 2009: midterm and solutions

Final exam and solutions

Year 2010: midterm, and solutions

Final exam, and solutions