Spring Quarter 2012

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: Fridays 8:30 am to 11:30 am at Room C02, Harper Center

Bus 41202-85: Saturdays 9:00 am to 12:00 noon at Room 408, 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: Wednesdays 12:00 noon to 1:00 pm at C02, Harper Center. (Starts from Week 2.)

BS41202-85: Saturdays 12:10 pm to 1:00 pm at Room 408, Gleacher Center.

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. (Data sets will be updated)

>> Print a copy of the lecture notes before class.
<<

Week 1: Lecture 0 and Lecture 1 & Data sets used: d-aapl0211.txt, d-ibm0110.txt, d-aapl0009.txt, m-ibm6708.txt,

m-tb3ms.txt, m-tb6ms.txt, d-useu.txt, q-ko-earns8309.txt, norwegianfire.txt

Week 2: Lecture & Data sets used: dgnp82.txt, m-unrate.txt (include 2011 data), d-ibmvwew6202.txt, q-gdpc96.txt

Week 3: Lecture & Data sets used: m-hstarts-5912.txt, 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: download directly using quantmod.

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

Week 8: Lecture ( A quick introduction of continuous-time models; move on to lecture 9, please print week 9 lecture too.)

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

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

Computing:

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

The most recent version of R is R2.14.1

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. A web site close to you.]

Instructions
for running R on PC will be demonstrated in class.

R commands used in lectures: (To be updated weekly)

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-axp3dx-0111.txt, m-ge3dx-4011.txt , d-jpus-0711.txt , d-usuk-0711.txt

Solutions & R-commands used.

HW2: Data sets used: q-gnp-4711.txt, m-ge3dx-4011.txt (as in HW#1), d-vix-0211.txt

Solutions & R-commands used.

HW3: Data sets used: m-dec125910-6111.txt, m-aaa-1911.txt, m-baa-1911.txt, q-jnj-earns-9211.txt

Solutions & R-commands used.

HW4: Data sets used: m-dec125910-6111.txt (see HW#3), m-kovw-5111.txt, d-usuk-0711.txt

Solutions & R-commands used.

HW5: Data sets used: m-ibmsp-5111.txt, taq-abtdec01t10-2011.txt

Solutions & R-commands used.

HW6: Date sets used.

Solutions & R-commands used.

Office hour
: (a) Wednesday: 10:30 am to 11:30 am (Harper center Rm 455)

(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 4 (Friday)

Weekend session: May 5

Lecture after the exam.

Final Exam:
Exam week

Campus: Friday, June 8, 8:00 am to 11:00 am

Evening: Saturday, June 9, 9:00 am to 12:00 noon.

Open book and notes.

[ >> Arrangement will be made for graduating students <<]

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.

18. Risk measure: RMeasure.R

Feedback:

Final Exam: Examand Solutions

(1) Campus: June 8, 8:00 am to 11:00 am. Room C02

(2) Weekend: June 9, 9:00 am to 12:00 noon, Gleacher Room 408

Old exams :

Year 2010: midterm, and solutions

Final exam, and solutions

Year 2011: midterm and solutions

Final exam and solutions