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30 views3 pages

Course Outline

course out

Uploaded by

faisalnasiru0220
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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HAWASSA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS


DEPARTMENT OF ECONOMICS

Course title: Financial Econometrics Credit hours: 4 hrs


Instructor: Henok Sisay, [email protected] Year, 2023

Course description

The course aims at introducing the theory (and practice) of cross-sectional econometrics. It first makes
an introduction to the basic concepts in econometrics like economic and econometric modeling as well
as types of data; then proceeds to the simple classical linear regression model and introduces estimation
techniques method of moments, ordinary least squares and maximum likelihood estimation, inference
and analyses of residuals. This is then built into the multiple linear regressions. After making tests of linear
restrictions emanating from economic theory, the course will highlight the problems of multicollinearity,
heteroscedasticity and autocorrelation.

Hence, familiarity with the material, particularly sampling distributions, estimation and hypothesis
testing will be of much help. These will be applied on Ethiopian on data using statistical packages.

Course objectives

The main objective of this course is to enable students have a good background knowledge on cross-sectional
econometric models. More specifically, after the completion of the course, students are expected to:

• Distinguish between economic and econometric models;


• Do simple and multiple regression with economic data (both manually and using statistical packages);
• Interpret regression results and test hypotheses (both manually and using statistical packages); and
• Detect (inexistence of problems of multicollinearity, heteroscedasticity and autocorrelation as well as
suggest how to rectify such problems (both manually and using statistical packages).

Course evaluations
• Assignment: 20%
• Midterm exam: 30%
• Final exam: 50%
Course contents
Chapter 1: Introduction
1.1. Definition and Scope of Econometrics
1.2. Models: Economic models and Econometric models
1.3. Steps in Econometrics Analysis
1.4. The Sources and Types of Data
Chapter 2: Simple Linear Regression Models
2.1. Concept of Regression Function
2.2. Method of Moments & Method of Least Squares
2.3. Residuals and Measures of the Goodness-of-fit
2.4. Properties of OLS Estimates and Gauss-Markov Theorem
2.5. Maximum Likelihood Estimation
2.6. Confidence Intervals and Hypothesis Testing
2.7. Predictions using Simple Linear Regression Model
Chapter 3: The Classical Regression Analysis: The Multiple Linear Regression Models
3.1. Method of Ordinary Least Squares revised
3.2. Partial Correlation Coefficients & their Interpretation
3.3. Coefficient of Multiple Determinations
3.4. Properties of Least Squares and Gauss-Markov Theorem
3.5. Hypothesis Testing in Multiple Linear Regressions
3.6. Predictions using Multiple Linear Regression
Chapter 4: Violations of the Assumptions of the Classical Model
5.1. Multicollinearity
5.2. Heteroscedasticity
5.3. Autocorrelation
5.4. Specification Errors: Omission of Variables
5.5. Tests of Parameter Stability
Chapter 5: regression analysis with qualitative information: Binary (Dummy Variables)
5.1 Describing Qualitative Information
5.2 Dummy as Independent Variable
5.3 Dummy as Dependent Variable
5.3.1 The Linear Probability Model (LPM)
5.3.2 The Logit and Probit Modes
5.3.3 Interpreting the Probit and Logit Model Estimates
Chapter 6: Introduction to Basic Regression Analysis With Time Series Data
6.1 The Nature of Time Series Data
6.2 Stationary and Non-Stationary Stochastic Processes
6.3 Trend Stationary and Difference Stationary Stochastic Processes
6.4 Integrated Stochastic Process
6.5 Test of Stationarity: The Unit Root Test
Chapter 7: Introduction to Simultaneous Equation Models (Optional)
7.1 The Nature of Simultaneous Equation Models
7.2 Simultaneity Bias
7.3 Order and Rank Conditions of Identification
7.4 Indirect Squares and 2SLS Estimation of Structural Equations
• References
• Chris Brooks, 2008. Econometrics for finance, Second edition. Cambridge University Press.
• Jeffery M. Wooldridge, 2012. Introductory Econometrics: A modern Approach. Fifth edition.
South-Western Cengage Learning.
• Gujarati, D.N., 2004. Basic Econometrics, Third edition. The McGraw-Hill Companies

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