FM404      Half Unit
Forecasting Financial time Series

This information is for the 2016/17 session.

Teacher responsible

Professor Denis Kristensen 


This course is compulsory on the MPhil/PhD in Finance. This course is available on the CEMS Exchange, IMEX Exchange, MSc in Accounting and Finance, MSc in Finance and Economics, MSc in Finance and Economics (Research), MSc in Finance and Private Equity, MSc in Financial Mathematics, MSc in Risk and Finance, MSc in Risk and Stochastics, MSc in Statistics (Financial Statistics), MSc in Statistics (Financial Statistics) (Research) and MiM Exchange. This course is available with permission as an outside option to students on other programmes where regulations permit.


Students must have completed Quantitative Methods for Finance and Risk Analysis (FM442).

The first half of FM437 Financial Econometrics, or alternatively FM442 Quantitative Methods for Finance and Risk Analysis, is a required prerequisite. Students who can demonstrate comparable background may be granted an exemption from this requirement.

Course content

This course will examine the techniques involved with forecasting key variables in finance, and how to incorporate model uncertainty into financial forecasts. Students will learn both the theory and the practice of forecasting in finance.

The following topics will be covered: introduction to time series analysis; Maximum Likelihood Estimation (MLE) with time series data, and MLE based model selection; Bayesian inference, posterior probabilities, and Bayesian Model Averaging; Markov Chain Monte Carlo methods; present value regressions, vector autoregressios, causality, and cointegration; asset pricing and the Generalized Method of Moments (GMM); frequentist and Bayesian information theoretic alternatives to GMM.

Additional information can be found on Moodle (for current students)


20 hours of lectures, 10 hours of classes and 10 hours of computer workshops in the LT.

Formative coursework

Regular problem sets.

Indicative reading

Lecture notes will be provided, and some journal articles may also be used.


Exam (100%, duration: 3 hours and 15 minutes) in the main exam period.

Key facts

Department: Finance

Total students 2015/16: 11

Average class size 2015/16: 6

Controlled access 2015/16: Yes

Value: Half Unit

Guidelines for interpreting course guide information

Personal development skills

  • Application of information skills
  • Application of numeracy skills
  • Specialist skills