By Ruey S. Tsay

Offers statistical instruments and methods had to comprehend today's monetary markets

The moment version of this significantly acclaimed textual content offers a complete and systematic creation to monetary econometric versions and their functions in modeling and predicting monetary time sequence facts. This most up-to-date variation maintains to stress empirical monetary information and makes a speciality of real-world examples. Following this procedure, readers will grasp key elements of monetary time sequence, together with volatility modeling, neural community functions, industry microstructure and high-frequency monetary info, continuous-time types and Ito's Lemma, price in danger, a number of returns research, monetary issue types, and econometric modeling through computation-intensive methods.

The writer starts with the fundamental features of economic time sequence info, environment the root for the 3 major topics:

research and alertness of univariate monetary time series
go back sequence of a number of assets
Bayesian inference in finance methods

This new version is a completely revised and up to date textual content, together with the addition of S-Plus® instructions and illustrations. routines were completely up to date and increased and comprise the most up-tp-date facts, delivering readers with extra possibilities to place the types and strategies into perform. one of the new fabric extra to the textual content, readers will find:

constant covariance estimation less than heteroscedasticity and serial correlation
substitute ways to volatility modeling
monetary issue models
State-space models
Kalman filtering
Estimation of stochastic diffusion models

The instruments supplied during this textual content reduction readers in constructing a deeper figuring out of monetary markets via firsthand adventure in operating with monetary info. this is often a terrific textbook for MBA scholars in addition to a reference for researchers and execs in company and finance.

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Extra resources for Analysis of Financial Time Series

Example text

Here we simply employ an AR(3) model for the data. Denoting the growth rate by rt , we can use the model building procedure of the next subsection to estimate the model. 0098. 5. S. I.

A) Express the simple returns in percentages. Compute the sample mean, standard deviation, skewness, excess kurtosis, minimum, and maximum of the percentage simple returns. (b) Transform the simple returns to log returns. (c) Express the log returns in percentages. Compute the sample mean, standard deviation, skewness, excess kurtosis, minimum, and maximum of the percentage log returns. (d) Test the null hypothesis that the mean of the log returns of each stock is zero. ) Use 5% significance level to draw your conclusion.

We denote the mean of X by µx . The th central moment of X is defined as m = E[(X − µx ) ] = ∞ −∞ (x − µx ) f (x) dx 9 DISTRIBUTIONAL PROPERTIES OF RETURNS provided that the integral exists. The second central moment, denoted by σx2 , measures the variability of X and is called the variance of X. The positive square root, σx , of variance is the standard deviation of X. The first two moments of a random variable uniquely determine a normal distribution. For other distributions, higher order moments are also of interest.

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