Customer Reviews

Financial Econometrics: Problems, Models, and Methods.

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(Forget the stars; I'm just posting the Table of Contents)

Table of Contents

Preface vii
1. Introduction 1
2. Univariate Linear Models: The AR(1) process and Its Extensions 17
3. Multivariate Linear Models: VARMA Representation 53
4. Simultaneity, Recursivty, and Casuality Analysis 81
5. Persistence and Cointegration 105
6. Conditional Heteroscedasticity: Nonlinear Autoaggressive Models, ARCH Models, Stochastic Volatility Models 117
7. Expection and Present Value Models 151
8. Intertemporal Behavior and the Method of Moments 173
9. Dynamic Factor Models 195
10. Dynamic Qualitative Proceses 219
11. Diffusion Models 241
12. Estimation of Diffusion Models 285
13. Econometrics of Derivatives 317
14. Dynamic Models for High-Freguency data 351
15. Market Indexes 247
16. Management of Extreme Risks 427
References 451
Index 477

The book introduces a number of topics that usually can be only found in papers. For example, the treatment of the econometrics of derivatives, although not very extensive, is excellent. In this regard the book is vastly superior to Cambell and Lo's book. Overall, the book covers a wealth of topics in very accesible and concise manner. Probably, the best introduction to modern financial econometrics for practitioners.

This book is not completely useless. It does tell you something about models that are used in finance. But the title misleads: there is a lot of description of models, but not much on estimation and inference procedures.

There is a general air of editorial sloppiness in a combination of factual errors, grammatical slips, awkward language and inscrutable logic. For example, on p.36 a process is defined to be I(1) iff its first difference is a weak white noise. And on p.172 there is this: "It is likely the asset prices to [sic] follow a nonstationary process, whereas the dividends and the excess gains are stationary processes." Huh? In the discussion of the consumption-based CAPM money and a price level are inexplicably included. Things of this kind recur through out.