Faculty of Economics http://www.econ.cam.ac.

uk/

R301A TIME SERIES

COURSE OUTLINE 2024-25

LECTURER: Prof Andrew Harvey

Prof Andrew Harvey | Faculty of Economics (cam.ac.uk)

OFFICE HOURS: By appointment. Please email [email protected]

FORMAT OF COURSE:

Teaching Hours Overview:

• 18 hours comprising of Lectures during Lent Term.

• In addition to lectures, there will be 8 hours comprising of 4 x 2-hour Classes during Lent Term and 2
x 2-hour Revision Class during Easter Term.

COURSE OVERVIEW:

Course Outline:

The course will show how economic and financial time series can be modelled and analysed.

Course Objectives:

The aim is to provide understanding and insight into the methods used, as well as explaining the technical
details.

Who this Course is for:

MPhil in Economic Research students.

Faculty of Economics, University of Cambridge, Sidgwick Ave, Cambridge, CB3 9DD Table of Contents
Faculty of Economics http://www.econ.cam.ac.uk/

Specific Topics Covered:

1. Time series models

Introduction - trends, cycles and seasonals. Stationary time series. ARMA models. Long memory.

2. Unobserved components, state space models and the Kalman filter

Unobserved components and signal extraction. State space models and the Kalman filter.

3. Spectral Analysis

The spectrum and its interpretation. Estimation of the spectrum.

4. Trends and cycles in macroeconomic time series.

Seasonality ARIMA models. Structural (unobserved component) time series models.

Extracting trends and cycles from unobserved components models. Tests for nonstationarity.
Seasonality.

Analysis of the effects of moving average and differencing operations.

5. Explanatory variables and interventions.

6. Multivariate models and co-integration

Multivariate time series models. Co-integration and common trends. Vector autoregressions and vector
error correction models. Control groups.

7. Nonlinear models

Independence, uncorrelatedness and martingale differences. Nonlinear models. Stationarity and

invertibility. Moment-driven and score-driven models. Dynamic models for location and location/scale in
positive variables.

8. Volatility

Properties of financial returns; stochastic volatility and GARCH; score-driven EGARCH models. Intra-day
financial data and models for realized variance and range.

9. Correlation and association

Dynamic correlation. Measures of association and dynamic copulas. Regime switching models.

Lecture Notes:

All lecture notes will be posted on Moodle before each lecture.

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Faculty of Economics http://www.econ.cam.ac.uk/

RESOURCES AND READING MATERIALS:

Resource: Description:

Main Texts * Commandeur, J.J.F. and S.J. Koopman. An introduction to state space time
series analysis. OUP, 2007.

Durbin, J. and S.J. Koopman, Time Series Analysis by State Space Methods, 2nd
ed. Oxford University Press, Oxford, 2012.

Harvey, A. C. Dynamic Models for Volatility and Heavy Tails. Cambridge

University Press, 2013.

* Harvey, A. C., Time Series Models (TSM), 2nd Edition, Harvester Wheatsheaf,
1993. [Currently out of print]

Martin, V., Hurn, S. and D. Harris, (MHH) Econometric Modelling with Time
Series: Specification, Estimation and Testing, 2013.

* Taylor, S. Asset Price Dynamics, Volatility, and Prediction. Princeton University

Press, 2005.

* Taylor, S. Modelling Financial Time Series, 2nd edition. World Scientific, 2008.

Other references Alizadeh, S., Brandt, M.W., and F.X. Diebold (2002). Range-based estimation of
stochastic volatility models. Journal of Finance, 62, 1047-91.

Andersen, T.G., Bollerslev, T., Christo¤ersen, P.F. and F.X. Diebold. (2006).
Volatility and correlation forecasting. Handbook of Economic Forecasting, edited
by G Elliot, C Granger and A Timmermann, 777-878. North Holland.

Blasques, C. Advanced Econometric Methods, 2021. A. Publications.

Bollerslev, T., Engle, R.F. and D.B. Nelson, (1994). ARCH models, in Handbook of
Econometrics, Volume 4, 2959-3038. Engle, R.F. and McFadden, D.L. (eds).
Amsterdam: North-Holland

Creal, D., Koopman, S.J., and A. Lucas (2013). Generalized autoregressive score
models with applications. Journal of Applied Econometrics, 28, 777-795.

Franke, J., Hardle, W.K., Hafner, C.M., Statistics of Financial Markets, Third
Edition, Springer, 2011.

Faculty of Economics, University of Cambridge, Sidgwick Ave, Cambridge, CB3 9DD Table of Contents
Faculty of Economics http://www.econ.cam.ac.uk/

Harvey, A. C., Forecasting, Structural Time Series Models and the Kalman Filter
(FSK), Cambridge University Press, 1989

Harvey, A.C., (2006). Forecasting with Unobserved Components Time Series

Models, Handbook of Economic Forecasting, edited by G Elliot, C Granger and A
Timmermann, 327-412. North Holland.

Harvey, A (2022) Score-driven time series models. Annual Review of Statistics and
Its Application, 9, 321-42. doi: 10.1146/annurev-statistics-040120-021023

Harvey, A and T. Proietti (2005). Readings in Unobserved components Models.

OUP.

Hautsch, N. Econometrics of Financial High-Frequency Data, Berlin: Springer

Verlag, 2012.

Mills, T. and R.N. Markellos, The Econometric Modelling of Financial Time Series,
3rd ed. Cambridge University Press, 2008

Tsay, R, Analysis of Financial Time Series, 3rd ed. Wiley, 2010.

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