Week 11 Tutorial Exercise: Model specification
Question 1:
Youve been hired by Conda the new Chinese automobile manufacturer, to build a model of
Chinese car prices in order to help the company undercut the prices.
As a student with knowledge of Econometr

EF3450
Principles of Econometrics
Week 1-2
Introduction to Econometrics;
Basic Statistical Concepts
City University of Hong Kong
Dr. Isabel Yan
1. Introduction to Econometrics
Econometrics means economic measurement. It is the application of
statistics t

EF3450
Principles of Econometrics
Week 3
The Classical Linear Regression Model
and the Least Squares Estimators
City University of Hong Kong
Dr. Isabel Yan
1
1. Introduction
As economists or financial analysts, we are interested in
studying
relationships

EF3450
Principles of Econometrics
Week 4-5
Properties of the Ordinary Least Squares Estimator;
Hypothesis Testing in Simple Regression Model
City University of Hong Kong
Dr. Isabel Yan
1
1.The Ordinary Least Squares Estimators (OLS) as
Random Variables
I

1.1 d
1.2 c
1.3 a 1.4 c 1.5 a
2.1(a) The Solow growth model predicts higher productivity with higher saving rates and lower population growth.
And the results of this regression correspond to the expectations. According to the results, holding sk constant

EF3450
Principles of Econometrics
Week 12
Violation of basic assumption #3:
Serial correlation (autocorrelation)
City University of Hong Kong
Dr. Isabel Yan
Violations of basic assumption #3
1. Serial correlation (autocorrelation)
So far we assume that th

EF3450
Principle of Econometrics
Week 11
Violation of basic assumption #2:
Heteroskedasticity
City University of Hong Kong
Dr. Isabel Yan
1
Violations of basic assumptions
1. Heteroskedasticity
Consider the food expenditure example
yi = 1 + 2 xi + ei
whic

EF3450
Principles of Econometrics
Week 10
Dummy Variables and Multicollinearity Problem;
City University of Hong Kong
Dr. Isabel Yan
1. What are Dummy Variables?
Dummy variables are explanatory variables that only take two values, usually 0 and 1,
which i

EF3450
Principles of Econometrics
Week 9
Some Nonlinear Functional Forms in Regression;
Problems of omitting relevant variables;
Problems of including irrelevant variables
City University of Hong Kong
Dr. Isabel Yan
1. Modeling nonlinear relationship betw

EF3450
Principles of Econometrics
Week 6-8
Measuring the Goodness of Fit;
Estimation of Multiple Regression Model;
Hypothesis Testing and Confidence Intervals in Multiple
Regression Model
City University of Hong Kong
Dr. Isabel Yan
1. The Multiple Regress

Appendix B: Characteristics of Probability
Distributions
WONG Chi Leung (Adam)
2017 Spring
Department of Economics, Lingnan University
B.1 Expected value
Let X be a discrete random variable (r.v.) with probability function (PF) f .
The expected value of X

xd
7/14/99 9:37 PM
Page 780
Appendix G
Statistical Tables
TABLE G.2
Critical Values of the t Distribution
Significance Level
1-Tailed:
2-Tailed:
D
e
g
r
e
e
s
o
f
F
r
e
e
d
o
m
.10
.20
.05
.10
.025
.050
.01
.02
.005
.010
1
2
3
4
5
3.078
1.886
1.638
1.533

Lecture 9 The Demand for Money C 514 . 70)
'(I.) IsSue and Questions
A. Main iSsue:j. the effects of monetary pol1cy on aggregate'9
. . . . "' economic act1v1ty (the role Of money 1n the
. _ economy)- . ~ . ~ -. _
B.Keyquest10nSS 1- Whemher the quant1ty o

Lecture 7: Money, Banking, and Exchange Rate in Hong Kong
_._._._-
l. The Financial System in Hong Kong
II. Money and Banking in Hong Kong
A. The Banking System
B. Money demand and money supply in Hong Kong
III. Currency Broad System and Exchange Rate Sys

Lecture 7: Money Multiplier and Money Supply (CM g.)
MM a 'J .
(1) Players in the Money Supply Process
The Fed is not the only player whose behavior influences
the level of deposits and therefore the money supply.
Banks decisions regarding the amount of e

, (may)
Lecture 6: Money Supply Process - M37
(I) Money supply and Monetary Base
while Monetary Base (MB) = C+ R
WW . chWILMA WW. '
Money supply ( MS ) = C + D ,
My
C: currency in circulation, D : publics depoSits in banking system
R: reserves owned by

Lecture 1 : Financial System, Financial Instrument, and Money
_
(I) Financial System and Flow of Funds
1. nancial system :-
a system that provides a mechanism by which funds ow from those who
have money or surplus funds (the saver lenders) to those who wa

Lecture 4: The Risk and Term Structure of Interest Rates
I. The Sources and Causes of Interest Rates Differentiation
(Why different bonds have different interest rates?)
a) due to different risk,
b) due to different maturity
II. Risk Structure of Intere

Appendix A: Review of Statistics
WONG Chi Leung (Adam)
2017 Spring
Department of Economics, Lingnan University
A.1 Some notation
n
X
Xi = X1 + X2 + + Xn
i=1
Properties:
Pn
1.
(k constant)
i=1 k = nk.
P
P
2.
kXi = k Xi .
P
P
P
3.
(Xi + Yi ) = Xi + Yi .
Pn

Week 12 Autocorrelation
A. Causes of Autocorrelation
(Pure) Autocorrelation arises when the error
term of observations are correlated.
It can be named as first order serial correlation,
second order serial correlation etc.
t = t 1 + ut
Examples
1.
2.
Exam

Heteroskedasticity (Hetero)
1.
2.
3.
What causes Hetero?
How to test Hetero?
The remedies
1. Causes of Hetero
Hetero is the violation of classical assumpti
on V (Homoskedasticity) which states that t
he observations of the error term are drawn
from a dist

Week 1 Tutorial: Introduction to
Econometrics and Use of E-view
1.
2.
Introduction to
Econometrics: Case on
Analyst
Recommendations
Using E-view to
Reference: Introduction
calculate basic statistics to
Econometrics by James H.
Stock and Mark W. Watson
1.

EF3450
Principles of Econometrics
Week 4-5
Properties of the Ordinary Least Squares Estimator;
Hypothesis Testing in Simple Regression Model
City University of Hong Kong
Dr. Isabel Yan
1.The Least Squares Estimators
e4
y = 1 + 2 x
e3
e2
t = t 2 x
etet=yy

EF3450
Principles of Econometrics
Week 3
The Classical Linear Regression Model
and the Least Squares Estimators
City University of Hong Kong
Dr. Isabel Yan
1.1 Motivations
1. Introduction
As economists or financial analysts, we are interested in
studying

EF3450
Principles of Econometrics
Lecture 1
Introduction to Econometrics;
Basic Statistical Concepts
City University of Hong Kong
Dr. Isabel Yan
1. Introduction to Econometrics
Econometrics means economic measurement. It is the application of
statistics t

Issues in model specification
Adding irrelevant
variables
Omitting variables
Issues in model specification
1.
2.
In most of the research in Econometrics,
multiple regression (including more than
one X variable) will be considered.
Two issues are commonly

Exercise: The Effects of Data Scaling on OLS Statistics
The E-view file BWGHT.RAW contains data about weight of child birth, annual family
income and cigarettes smoked by mother while pregnant.
Suppose, we run an regression relating infant birth weight to