Faculty of Humanities and Social Sciences
University of Sri Jayewardenepura, Sri Lanka
BA (Honours) in Economics
DEPARTMENT OF ECONOMICS
Course Specification
Field of Study: Economics
Code of the
Course Unit
Title of the
2. Course Unit
1.
3. Year
6.
7.
Status of the
Course Unit
ECF 3133
Financial Econometrics
3
4. Semester
CCU
Compulsory
course Unit
I
HCU
Honours
course Unit
5. Number of Credits
√
03
HOCU
Honours Optional
course Unit
Coordinators/ Examiners of the Course Unit
I. Dr. Ajantha Kalyanaratne
8. Mission of FHSS
The faculty of humanities and social sciences is committed to the development of the
community and the nation at large through the dissemination and enhancement of knowledge
enriched with the country’s cultural heritage
Graduates of the Bachelor of Arts (Honours) in Financial Economics are equipped with
comprehensive expertise in economic theories, financial principles, and advanced quantitative
methods. Their strong analytical skills empower them to dissect complex financial challenges,
assess risks, and design data-driven solutions that effectively bridge theoretical knowledge
with practical application.
9. Graduate Profile
They are articulate communicators, capable of presenting intricate financial insights to a range
of audiences, from policymakers to stakeholders. As collaborative professionals, they excel in
team settings, taking on leadership roles and contributing innovative ideas to multidisciplinary
projects. Their creative thinking, problem-solving abilities, and entrepreneurial mindset
enable them to manage financial initiatives and foster sustainable economic growth.
Resilient and adaptable, these graduates navigate the complexities of global financial systems
with confidence. Proficient in leveraging financial data and building meaningful professional
networks, they uphold ethical practices and maintain high professional standards. Committed
to lifelong learning, they continuously refine their skills to stay relevant and impactful in the
ever-evolving field of financial economics.
10. Pre-requisites
ECF 2233
Web: https://fhss.sjp.ac.lk/
Faculty of Humanities and Social Sciences
University of Sri Jayewardenepura, Sri Lanka
Programme Learning Outcomes (PLOs)
Upon successful completion of the programme, graduates will be able to:
1. Demonstrate a strong understanding of core theories and principles in economics and finance, and
explain the functioning of financial institutions, markets, and regulatory frameworks in local and global
contexts.
2. Apply quantitative, statistical, and econometric tools to analyze economic and financial data, evaluate
policy decisions, and conduct independent research to solve real-world economic problems.
11.
3. Effectively interpret and utilize financial data, use IT tools for data analysis and presentation, and apply
theoretical knowledge to practical tasks and decision-making in professional settings.
4. Communicate clearly and confidently using academic and professional language, and demonstrate
teamwork, leadership, and collaboration in diverse group settings.
5. Exhibit self-motivation, time management, adaptability, and a commitment to ethical conduct and
lifelong learning in the fields of economics and finance.
Main Objectives of the Course Unit
12.
The main objective of this course unit is to introduce students to the principles and applications of econometric
methods, with a focus on linear regression modelling, estimation, inference, and diagnostic techniques, enabling them
to analyze economic data and draw meaningful empirical conclusions for research and policy.
Intended Learning Outcomes (ILOs) of the Course Unit
After completion of the course unit, the student will be able to;
1. Understand the principles and assumptions of linear regression and time series models.
2. Apply regression and time series techniques to real-world financial data.
13.
3. Diagnose violations in model assumptions and implement appropriate remedies.
4. Interpret and communicate the outcomes of empirical models in financial contexts.
5. Use statistical software to analyze financial data and present group-based research outputs.
Contents
Week
st
1
nd
2
rd
3
th
4
th
5
th
6
th
7
Main Theme/s
No.
of
Hrs
Sub Themes
 Course Specification
 Nature and scope
 Types of financial data
 Least squares estimation
 Algebraic derivation
Principle of OLS and assumptions
 Normal equations
 Assumptions
Simple and multiple linear regression  Estimation, interpretation, standard errors, goodness-of-fit
- estimation and inference
 t-test, F-test, confidence intervals, R² interpretation
 Foundations (financial data and their challenges)
 Capital Asset Financing model
Regression applications in finance
 OLS assumptions and implications for financial modelling
 CA 01
 Multicollinearity: causes, detection and remedial measures
Violations of assumptions I
 Consequences
 Heteroskedasticity: causes, detection and remedial measures
Violations of assumptions II
 Consequences
 Autocorrelation: causes, detection and remedial measures
Violations of assumptions III
 Consequences
Introduction
03
03
03
03
03
03
03
Web: https://fhss.sjp.ac.lk/
Faculty of Humanities and Social Sciences
University of Sri Jayewardenepura, Sri Lanka
th
8
th
9
th
10
th
11
Dynamic models I: Lag models and
Adaptive Expectations
Dynamic models II: AR & IV
models
Simultaneous Equation Models:
Introduction
Identification in simultaneous
Equation Models
 Distributed lag models, Koyck transformation, adaptive expectations
 CA 02
03
 AR, ARDL, instrumental variables, when and how to use IV
03
 Structural vs. reduced forms, simultaneity bias, real-world examples
03
 Order and rank conditions, identification strategies
 CA 03
 Stationarity, white noise
 Components of a time series
 ACF and PACF
 Stationarity, model identification using ACF/PACF
 AR, MA, ARMA, ARIMA, SARIMA models and differencing
03
12
th
Time Series analysis I
th
Time Series analysis II
th
Time Series analysis III
 Model estimation, diagnostics, forecasting
03
th
Final project report submission and
group presentation
 Group presentations
03
13
14
15
03
03
Number of Notional Hours: 150 notional hours for a 3-credit course
No. of self-learning hours: 105
No of direct contact hours: 45
16.
Teaching & Learning Activities used
1. Interactive lectures
2. Theory and derivation
3. Software demonstrations
4. Hands on lab sessions
5. Model estimation
6. Group presentations
7. Peer review
1.
2.
3.
4.
5.
Self-learning
Preparation for ICAs
Studying case studies
Writing report
Preparation for group works
Assessment and evaluation
In Course Assessments (ICA) (30)%
17.
1. Formative Assessments (FA) will be given for
End of the Semester Assessments (80%)
This course unit has a final exam component.
each topic as reflective assessments of the
students at the end of each main topic
Recommended Readings
20
1. Gujarati, D. N. (2004). Basic econometrics (4th ed.). McGraw-Hill.
2. Gujarati, D.N. and Dawn C.Porter *
3. Koutsoyiannis, A. (1977). Theory of econometrics: An introductory exposition of econometric methods.
Macmillan.
4. Wooldridge, J. M. (2020). Introductory econometrics: A modern approach (7th ed.). Cengage Learning.
5. Brooks, C. (2019). Introductory Econometrics for Finance (4th ed.). Cambridge University Press.
Additional materials will be provided as required
Web: https://fhss.sjp.ac.lk/