Sales of the first edition of this book surpassed expectations (at least those of the author). Almost all of those who have contacted the author seem to like the book, and while other textbooks have been published since that date in the broad area of financial econometrics, none is really at the introductory level. All of the motivations for the first edition, described below, seem just as important today. Given that the book seems to have gone down well with readers, I have left the style largely unaltered and made small changes to the structure, described below.

The main motivations for writing the first edition of the book were:

• To write a book that focused on using and applying the techniques rather than deriving proofs and learning formulae

• To write an accessible textbook that required no prior knowledge of econometrics, but which also covered more recently developed approaches usually found only in more advanced texts

• To use examples and terminology from finance rather than economics since there are many introductory texts in econometrics aimed at students of economics but none for students of finance

• To litter the book with case studies of the use of econometrics in practice taken from the academic finance literature

• To include sample instructions, screen dumps and computer output from two popular econometrics packages. This enabled readers to see how the techniques can be implemented in practice

• To develop a companion web site containing answers to end-of-chapter questions, PowerPoint slides and other supporting materials.