University of Hong Kong

School of Economics and Finance

ECON0701: Introductory Econometrics
Spring 2014

I. INFORMATION ON INSTRUCTOR AND TUTOR

Instructor: J ames P. Vere, 901 K. K. Leung Building
Office Hours: Tuesday 2 pm - 3 pm.
Phone: x3040
Email: [email protected]

Teaching Assistant: Luyao PAN ([email protected])

II. COURSE DESCRIPTION AND OBJECTIVES

Course description:

Most of economics is modeling relations among economic variables. Examples range from the relation
between interest rates and inflation rate, the effect of the education level on income, or the relationship
between prison sentences and crime rates. To evaluate these relations, economists rely on data
analysis. Econometrics, hence, is this branch of economics that formulates statistical methodology to
deal with the empirical problems typical of economic data. Consequently, the objective of this course is
to prepare students for basic empirical work in economics. In particular, topics will include basic data
analysis, regression analysis, and hypothesis testing. Students will be provided with the opportunity to
use actual economic data to test economic theories.

Course objectives:

1. To acquire and internalize knowledge of statistical methods used by economists and financial
professionals
2. To develop the ability to discern which method is most appropriate in a given situation, and
understand the limitations of the chosen method
3. To acquire the skills to apply these methods in a variety of contexts (e.g. microeconomic
analysis, macroeconomic analysis, and policy analysis) and with a variety of instruments (e.g.
Stata, Excel, calculator and statistical table)

Textbook

Wooldridge, J effrey M (2009). Introductory Econometrics. 4th edition. Singapore: Cengage
Learning.

III. LEARNING OUTCOMES

By the end of this course, students should be able to:

1. Understand the basic finite-sample properties of estimators (e.g. unbiasedness, efficiency) and
the conditions under which they apply
2. State and understand the Gauss-Markov theorem
3. Understand the basic large-sample properties of estimators (e.g. consistency, asymptotic
efficiency) and the conditions under which they apply
4. Use Stata to calculate the coefficients of the multiple linear regression model
5. Intrepret the coefficients of the multiple linear regression model (in both cross-sectional and
time-series settings)
6. Calculate and interpret the R
2
measure of model fit
7. Perform t-tests of single linear hypotheses and F-tests of joint linear hypotheses (with Stata
and by hand)
8. Understand the implications for estimation results when assumptions of the classical linear
model are violated (e.g., omitted variables, heteroskedasticity, serial correlation)
9. Test for violations of the assumptions of the classical linear model (with Stata; where
appropriate)
10. Know intuitively when the assumptions of the classical linear model would be inappropriate in
a real-world setting
11. Specify and use Stata to estimate weighted least squares regressions that correct for the
problem of heteroskedasticity
12. Specify and use Stata to estimate Prais-Winsten regressions that correct for the problem of
serial correlation

IV. ALIGNMENT OF PROGRAM AND COURSE OUTCOMES

The following matrix indicates the alignment between the course learning outcomes and the program
learning outcomes.

Program Learning Outcome Associated Course Learning Outcomes
Know the fundamental principles and
theories of economics and finance
1-3, 8
Be able to use analytical tools to
formulate and solve economic and
business problems
4, 6, 7, 9
Be able to distinguish between minor and
major issues
8, 10
Be able to identify and use relevant
information
5, 6, 8, 10

V. TEACHING AND LEARNING ACTIVITIES

Teaching and learning takes place through lectures, tutorials, and assignments.

VI. ASSESSMENT

Your final grade in this class will depend on three things: your homework (15%), a midterm
examination (25%), and your final examination grade (60%).

There will be a number of problem sets (approximately one per week) which will count toward 15% of
your final grade. These problems will be assigned on Fridays to be handed in by the following Friday.
You may work with other students on the problem sets, but you must submit your own answers. The
understanding of the homework problems is a necessary condition for understanding the course.
Hence, if you do not spend enough time on the homework, your understanding of the material will be
poor, and so too will be your grade.

The midterm exam will take place in class on Monday, March 17
th
. The final exam will be
comprehensive. Both the midterm and the final are mandatory.

VII. STANDARDS FOR ASSESSMENT

The basis for assessment is a weighted numerical average of students homework, midterm and final
examination scores. Letter grades will be assigned in accordance with Faculty-level guidelines for
courses offered by the School of Business and the School of Economics and Finance.

VIII. ACADEMIC CONDUCT

Plagiarism and copying of copyright materials are serious offenses and may lead to
disciplinary actions. You should read the chapters on Plagiarism and Copyright un the
Undergraduate/Postgraduate Handbook for details. You are strongly advised to read the
booklet entitled What is Plagiarism? which was distributed to you upon your admission to
the University, a copy of which can be found at http://www.hku.hk/plagiarism. A booklet
entitled Plagiarism and How to Avoid It is also available from the Main Library.
When completing homework assignments, you are permitted to consult with classmates and
the tutor but you must do the assignment individually and hand in your own work.
Consulting previous semesters answer keys or referring to any examination papers not
available on the course Web page or in the Librarys ExamBase database are strictly
prohibited.
Academic violations will result in automatic failure of the course, and may result in further
disciplinary action, up to and including discontinuation of studies.


IX. COURSE SCHEDULE

Tentative and subject to change. Refer to problem sets on the course Web page for definitive due
dates.

Week of 20 J anuary Review of Probability and Statistics
Wooldridge Appendices A, B and C

Week of 27 J anuary The Simple Regression Model
Wooldridge Chapter 2

Week of 3 February Chinese New Year (no class)

Week of 10 February Multiple Regression Analysis: Estimation
Wooldridge Chapter 3
Problem Set 1 due

Week of 17 February Mutiple Regression Analysis: Inference
Wooldridge Chapter 4
Problem Set 2 due

Week of 24 February Multiple Regression Analysis: Inference (continued)
Wooldridge Chapter 4
Problem Set 3 due

Week of 3 March Regression Analysis with Qualitative Information
Wooldridge Chapter 7
Problem Set 4 due

Week of 10 March Reading Week

Week of 17 March MIDTERM EXAMINATION

Week of 24 March Multiple Regression Analysis: OLS Asymptotics
Wooldridge Chapter 5

Week of 31 March Heteroskedasticity
Wooldridge Chapter 8
Problem Set 5 due

Week of 7 April Basic Regression Analysis with Time Series Data
Wooldridge Chapter 10
Problem Set 6 due

Week of 14 April Further Issues in Using OLS with Time Series Data
Wooldridge Chapter 11
Problem Set 7 due

Week of 21 April Serial Correlation and Heteroskedasticity in Time Series Regressions
Wooldridge Chapter 12
Problem Set 8 due

Week of 28 April Serial Correlation and Heteroskedasticity in Time Series Regressions
(continued) -or- special topic (time permitting)
Problem Set 9 due