This is a course in regression analysis and linear models with application to equity portfolio management. Basic methods taught in the course include simple and multiple linear regression, model selection, residual analysis, diagnostics, detection of multi-collinearity, nonstandard conditions and transformations. Principal components and factor analysis are also introduced. Examples will be taken from financial models, including the CAPM and multi-factor with applications to portfolio selection and asset allocation.
Campbell, J.Y., Lo, A.W. and MacKinlay, A.C. (1997). The Econometrics of Financial Markets. Princeton University Press; Modern Applied Statistics with Splus, by Venables and Ripley, Third Edition Springer-Verlag (0-387-98825-4); and handouts available through the course web page.