Lecture on Financial Economics and Data Analysis

Overview of Economics

• Economics based on data: three types
  • Cross-sectional parameters
  • Time series econometrics
  • Panel data
• Importance in financial economics

Types of Economics

• Microeconomics
  • Analysis of cross-section and panel data
  • Focuses on individual consumers, firms, and micro-level decision-making
  • Theoretical tools: utility maximization, profit maximization, market equilibrium
• Macroeconomics
  • Analysis based on time series and panel data
  • Deals with aggregate variables such as price levels, money supply, exchange rates, national output, investment, and economic growth
  • Time series is commonly associated with macroeconomics

Financial Economics

• Overlaps with both microeconomics and macroeconomics
• Includes models of individual behavior (microeconomic aspect)
• Analysis of market returns and exchange rate behavior (macroeconomic aspect)
• Use of long-term time series data and panel data

Recommended Books on Financial Economics

• Chris Brooks: