Guillaume Monarcha

Head of Quantitative Research, Orion Financial Partners

Financial Econometrics II

Les objectifs du cours

The last ten years have seen an extraordinary growth in the use of quantitative methods in financial markets. Professionals now use sophisticated statistical techniques in portfolio management, proprietary trading, derivative pricing, risk management and securities regulation. The purpose of the course is to offer an overview of mostly used econometrics tools and the way these methodologies can be used in empirical finance, both in investment banking and asset management. A strong emphasis is placed on practical applications in the course.

Plan du cours

1 / An Overview of Financial Data: Stylized facts of returns distributions

  • Prices, Returns and Time Aggregation
  • Portfolio Returns and Spatial Aggregation
  • Parameter Estimation
  • Market Efficiency and The Random Walk Hypotheses
  • Tests of the Random Walk Hypotheses

2 / Econometrics of the Efficient Frontier

  • Theoretical Background
  • Traditional Econometric Approaches
  • Alternative Econometric Approaches

3 / Capital Asset Pricing Model

  • Review of the CAPM
  • Statistical Framework for Estimation and Testing
  • Nonnormal and Non-IID Returns
  • Implementation of Tests
  • Cross-Sectional Regressions

4 / Multifactor Pricing Models

  • Theoretical Background
  • Estimation and Testing, SURE Regression
  • Risk Premia and Expected Returns
  • Selection of Factors
  • Deviations from Exact Factor Pricing and Arbitrage


Brandt, M. (2009), Portfolio Choice Problems, in Handbook of Financial Econometrics, Y. Ait-Sahalia & L.P. Hansen, Eds, North Holland.

Campbell J., Lo A., McKinley, A. (1997), The Econometrics of Financial Markets. NJ: Princeton University Press.

Garcia, R., Ghysels, E. & Renault, E. (2009). Econometrics of Option Pricing Models, in Handbook of Financial Econometrics, Y. Ait-Sahalia & L.P. Hansen, Eds, North Holland.

Gourieroux, C., Scaillet, O., Szafarz, A (1997), Econométrie de la Finance, Economica.

Lo A. (2008), Hedge Funds: An Analytic Perspective. Princeton, NJ: Princeton University Press.


Final Exam