Econometrics: ECOM30002 and ECOM90002 Lecture 1 …cf.fbe.unimelb.edu.au/courseoutlines/documents/2015/ECOM30002... · One 1-hour tutorial per week beginning in ... ECOM30002 and

Econometrics: ECOM30002 and ECOM90002Lecture 1 Maximum Likelihood: Basics

Professor Vance L. Martin

Semester 1

Professor Vance L. Martin () Econometrics: ECOM30002 and ECOM90002 Lecture 1 Maximum Likelihood: BasicsSemester 1 1 / 48

Lecture 1 Maximum Likelihood: Basics

Learning Objectives

1 Course Information2 Major Project3 The Linear Regression Model Reviewed4 Data Characteristics

Background Reading

1 �GROUP_PROJECT.PDF�, Handout on course website.


Lecture 1 Maximum Likelihood: BasicsCourse Information

Coordinator: Professor Vance L. Martin

Prerequisites:

One of Intermediate Macroeconomics or Intermediate Microeconomicsor Business Finance.One of Introductory Econometrics, Basic Econometrics, Statistics, oran H2A or better in Quantitative Methods 2.

Contact:

Lectures: Two 1-hour lecturesOne 1-hour tutorial per week beginning in the �rst weekTutor consultation times (times to be arranged - see course website)On-line tutor (available from the course website)Audio versions of the lectures are available on the web


Course Outline:

The course focuses on maximum likelihood methods to estimate and testeconometric models. Both analytical and numerical methods of estimationare discussed, while likelihood ratio, Wald and Lagrange multiplier testingframeworks are presented. Important special examples investigated areprobit and ordered probit regressions, Poisson regressions, linear andnonlinear regression models with heteroskedasticity and autocorrelation,ARCH models of volatility and simultaneous equations models. Allmathematical techniques including multivariate calculus and matrices, aredeveloped in the course.

Source: Melbourne Age, 3/3/2013


Main Reading:Lecture NotesLecture HandoutsArticles placed on the website

Background Reading:Hill, R.C., Gri¢ ths, W.E. and Lim, G.C. (2007), Principles ofEconometrics, 3rd Edition, Wiley.Stock, J.H. and Watson, M.W. (2007), Introduction to Econometrics,2nd Edition, Addison-Wesley Longman, Amsterdam.

Prescribed Text:None.Additional Reading:

Econometrics: Martin, V.L., Hurn, S. and Harris, D. (2013),Econometric Modelling with Time Series: Speci�cation, Estimation andTesting, Themes in Modern Econometrics, Cambridge University Press,New York.Calculus: Stewart, James (2008), Calculus, (6th ed.) ThomsonPublishers.Matrices: Anton, H. and Rorres, C. (2005), Elementary LinearAlgebra, Applications Version, (9th ed.) John Wiley and Sons.


CalculatorsStandard ordinary scienti�c calculators are allowed. Graphic andprogrammable calculators are not allowed in the exam.

Note that calculators will be needed in the �nal exam.

Software and Computers

EViews is available:

On campus in tutorial rooms and the Faculty computer lab.O¤ campus through a link on the course website.

Note that it will be necessary to be able to interpret EViews output inthe �nal exam.


Course Outline

Week Lectures Topic1 1,2 Maximum Likelihood: Basics2 3,4 Maximum Likelihood: General Case3 5,6 Maximum Likelihood: Numerical Methods4 7,8 Maximum Likelihood: Testing

5 9,10 Maximum Likelihood: Microeconometrics6 11,12 Maximum Likelihood: Heteroskedasticity7 13,14 Maximum Likelihood: Autocorrelation8 15,16 Maximum Likelihood: Speci�cation Analysis

9 17,18 Introduction to Simultaneous Equations10 19,20 Introduction to Simultaneous Equations11 21,22 Introduction to Asymptotic Distribution Theory12 23,24 Course Prizes, Exams and the Future


Weeks 1 to 4: Principles of Maximum Likelihood Estimation

Speci�cation

Estimation

Numerical Methods

Testing


Weeks 5 to 7: ApplicationsWho will win the Federal election?

Source: Melbourne Age, 18/2/2013, p.1


Source: Melbourne Age, 3/3/2013


What determines monetary policy?


Weeks 5 to 7: Applications continued

Modelling the Medal Count at the Olympic Games?

Predicting the medal count.



The �Great Moderation�

Source: www.federalreserve.gov/BOARDDOCS/SPEECHES/2004

/20040220/default.htm



The Food Crisis



Weeks 5 to 7: Applications continuedClimate Change


Which could have been avoided by doing THIS COURSE!Professor Vance L. Martin () Econometrics: ECOM30002 and ECOM90002 Lecture 1 Maximum Likelihood: BasicsSemester 1 15 / 48

Weeks 8 to 10: Extensions

Tru es

Source: Melbourne Age, Epicure, 10/2/2009, p.8


Weeks 11 to 12: Asymptotic Distribution Theory, Presentations andExam Preparation

We bring home the bacon!


Assessment:

Assessment Weight Due Where

Tutorial homework I 2.5% Week 3 Tutorial RoomTutorial homework II 2.5% Week 4 Tutorial RoomTutorial homework III 2.5% Week 5 Tutorial RoomTutorial homework IV 2.5% Week 6 Tutorial RoomTest (50 mins) 5% Week 7 Tutorial RoomMajor Project 20% Week 9 Submit onlineFinal Exam (2 hours) 65% End of Semester Exam Room


Lecture 1 Maximum Likelihood: BasicsMajor Project

Details

i Due Wednesday of Week 9 by 4.00pm (submit online).

ii Worth 20%

iii Groups sizes can be a minimum of one and a maximum of 6. Peopledo NOT have to be in the same tutorial.

iv AIM: Use the techniques of the course to write a research paper on atopic chosen by the group.

v You need to formulate your own hypotheses, collect the data,undertake empirical analysis and write up the results.

vi The expected length of the research report should be about 10 pages,with the maximum length not exceeding 15 pages, including allgraphs and tables.

vii Group decides on the weight allocated to each member of the group(stop free-riders). Any issues please see me!



Timelinei Week 3: Form a group of at most 6 people and identify a topic.ii Week 4: Discuss the topic with your tutor in the tutorial(s) orconsultation times.

iii Week 5: Collect data.iv Week 6: Write-up the introduction.iv Week 7: Generate empirical results and write-up the results.v Week 8: Write-up the implications of the results and formulate theconclusions, together with an overall proofread of the project.

vi Week 9: Submission of project.vii Week 10: Research essays marked and compared across tutorials.viii Week 11: Projects are short-listed with names of projects given in the

Lecture and placed on the website.xi Week 12: In the Monday lecture of Week 12, Groups on the short-listpresent their project at the lecture. The Student Body chooses thewinner!



Short-list from last year:

1 �Who�s Next? An Econometric Guide to the 2012 Election�2 �What Determines European Citizens�Attitudes Towards BiodiversityTowards Biodiversity Conservation?�

3 �Do Have What it Takes to Score A Second Date?�4 �An Analysis on Children�s Wellbeing in Rural India�5 �The Relationship Between the ASX200 and the Indicies of Its Top 5Trading Partners, the T-Distribution Approach�

Further details on the Major Project and other examples of potentialprojects, are given on the website in GROUP_PROJECT.PDF.



The Prize:An all expenses paid dinner immediately after the last lecture on theWedneday of the course with

1 Your favourite econometrics lecturer.

AND

2 Invited eminent guests.

Past examples are


Sir Clive Granger

1 Nobel Prize winner in economics in 2003.2 Knighted by the queen.3 100 Welsh Heros list.


Source: http://www.100welshheroes.com/en/top100


Econometrics: ECOM30002 and ECOM90002 Lecture 1 …cf.fbe.unimelb.edu.au/courseoutlines/documents/2015/ECOM30002... · One 1-hour tutorial per week beginning in ... ECOM30002 and

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