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Analysis of Financial Time Series by Ruey S. Tsay

By Ruey S. Tsay

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

The moment version of this severely acclaimed textual content presents a accomplished and systematic creation to monetary econometric versions and their functions in modeling and predicting monetary time sequence info. This most recent version maintains to stress empirical monetary facts and specializes in real-world examples. Following this procedure, readers will grasp key facets of monetary time sequence, together with volatility modeling, neural community functions, marketplace microstructure and high-frequency monetary facts, continuous-time versions and Ito's Lemma, price in danger, a number of returns research, monetary issue versions, and econometric modeling through computation-intensive methods.

The writer starts off with the fundamental features of economic time sequence facts, environment the basis 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 elevated and contain the most up-tp-date facts, delivering readers with extra possibilities to place the versions and techniques into perform. one of the new fabric extra to the textual content, readers will find:

constant covariance estimation lower than heteroscedasticity and serial correlation
replacement 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 knowing of monetary markets via firsthand adventure in operating with monetary facts. this can be an awesome textbook for MBA scholars in addition to a reference for researchers and execs in enterprise and finance.

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Additional info for Analysis of Financial Time Series

Sample text

Testing for zero autocorrelations has been used as a tool to check the efficient market assumption. However, the way by which stock prices are determined and index returns are calculated might introduce autocorrelations in the observed return series. This is particularly so in analysis of high-frequency financial data. We discuss some of these issues in Chapter 5. SCA Demonstration Output edited and % denotes explanation. input ibm. txt’ -- % Load data 30 LINEAR TIME SERIES ANALYSIS AND ITS APPLICATIONS acf ibm.

2) is called the sample autocorrelation function (ACF) of rt . It plays an important role in linear time series analysis. As a matter of fact, a linear time series model can be characterized by its ACF, and linear time series modeling makes use of the sample ACF to capture the linear dynamic of the data. 1 shows the sample autocorrelation functions of monthly simple and log returns of IBM stock from January 1926 to December 1997. The two sample ACFs are very close to each other, and they suggest that the serial correlations of monthly IBM stock returns are very small, if any.

Furthermore, stable distributions are capable of capturing excess kurtosis shown by historical stock returns. However, non-normal stable distributions do not have a finite variance, which is in conflict with most finance theories. In addition, statistical modeling using non-normal stable distributions is difficult. An example of nonnormal stable distributions is the Cauchy distribution, which is symmetric with respect to its median but has infinite variance. Scale Mixture of Normal Distributions Recent studies of stock returns tend to use scale mixture or finite mixture of normal distributions.

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