Ivo Welch and Matthew Rothman, Econ 1759, Fall 2008

Economics 1759, Fall 2008, is an experimental course that will teach modern research techniques in financial economics. The skills are useful both in graduate economics courses and in quantitative Wall Street research departments, and specifically those that work on quantitative equities investing. (Matthew Rothman is the global head of quantitative equity strategy research at Lehman Bros, and holds a PhD from the University of Chicago.)

Prerequisites

• Basic Programming Ability: You must have basic programming skills in a language of your choice: subroutines, control statements, variables.
• Basic Statistics: You must understand what an OLS regression is, and how to interpret its output. You must understand why the data line-fit is an estimate.
• Basic Finance: You must understand what the CAPM is, and how to use it.

We plan to give a simple entrance exam during the first session.

Here are recommendations for some books to read before class starts:

• Stock and Watson: Introduction to Econometrics.
• Schwartz, Phoenix, and Foy: Learning Perl (using your Brown account, so that it is free), or earlier editions.
• An Introduction to R
• Bodie, Kane, Marcus: Investments, Chapter 13. (We will hand out copies in class.)

Data

CRSP

CRSP's programming interface is essentially unusable. Therefore, we have prepared simple data sets for you. On the data server, please connect to /data/crsp2008/ and copy the files in this directory to your own notebook. The '.txt.gz' files can be uncompressed with 'zcat *.txt.gz'. Their formats are very simple: PERMNO (the CRSP identifier), tab, the data piece, tab, and the day. The contents of the 'crsp_names.txt' files are described in the header. Please read the CRSP documentation at FILLIN.

Compustat

Please refer to Alex's website.

Yahoo

Some sample program for translating yahoo quote.csv finance data into yhoo2csv.pl.

Computer Languages

Andrew suggested wilmott.com as a source for programming and finance. It may be geared more towards derivatives and high-frequency trading than our course, which is more geared towards equities and medium-frequency trading.

Obsolete Last Year's Material

[9/23] I plan to cover this on Monday.

[9/25] Material from lecture 2.

[10/1] Lecture 3 plan is here. Read Damien Conway's Bless my Referents. Will use skeleton.pm.

A draft and abbreviated version of the syllabus is in at data-course2.html and possibly data-course2.pdf.

Prerequisites

Preassign Learning perl and R-intro.pdf. Install ubuntu (with perl and R) if you run windows. Install perl and R if you run Mac OSX.