1. Principles of Econometrics University of Oulu Department of Economics Marko Korhonen

2. Principles of Econometrics The statistical analysis of economic and related data Lecturer: Marko Korhonen, University Lecturer Room: TA 313 Appointment time: Tu 13-14 e.mail: marko.korhonen@oulu.fimarko.korhonen@oulu.fi Teaching fellow: Santtu Karhinen, Doctoral student Room: ? Appointment time: during exercises e-mail: santtu.karhinen@oulu.fi

3. Principles of Econometrics Administrative matters Have you made your registration on this course? If not – Do it immediately after this lecture! Textbook – James Stock and Mark Watson: ”Introduction to Econometrics” (3rd edition, all editions ok). – Chapters 1-9. Lecture slides are in Noppa-portal. https://noppa.oulu.fi/noppa/kurssi/721066s/luennot Language: English (+partly Finnish). Prerequisites: It is highly recommended that the student has already passed the course 806116P Basic Methods in Statistics 1 (in Finnish: 806116P Tilastotiedettä kauppatieteilijöille, previously: 806109P Tilastotieteen perusmenetelmät 1) or has elementary knowledge of statistics and probability theory.

4. Contents of Stock and Watson Part I. Introduction and Review Chapter 1. Economic Questions and Data Chapter 2. Review of Probability Chapter 3. Review of Statistics Part II. Fundamentals of Regression Analysis Chapter 4. Linear Regression with One Regressor Chapter 5. Regression with a Single Regressor: Hypothesis Tests and Confidence Intervals Chapter 6. Linear Regression with Multiple Regressors Chapter 7. Hypothesis Tests and Confidence Intervals in Multiple Regression Chapter 8. Nonlinear Regression Functions Chapter 9. Assessing Studies Based on Multiple Regression Part III. Further Topics in Regression Analysis Chapter 10. Regression with Panel Data Chapter 11. Regression with a Binary Dependent Variable Chapter 12. Instrumental Variables Regression Chapter 13. Experiments and Quasi-Experiments Part IV. Regression Analysis of Economic Time Series Data Chapter 14. Introduction to Time Series Regression and Forecasting Chapter 15. Estimation of Dynamic Causal Effects Chapter 16. Additional Topics in Time Series Regression Part V. The Econometric Theory of Regression Analysis Chapter 17. The Theory of Linear Regression with One Regressor Chapter 18. The Theory of Multiple Regression

5. Principles of Econometrics Timetable (lectures) – Monday 12-15 (lectures). – Tuesday 14-15.30 (lectures) and 15.30 -17 (applications). Timetable (exercises) – See next slide

6. Applications Applications (every Tuesday 15.30-17) 1.Economics of crime: Understanding why crime fell in the U.S 1990s. 2.Economics of sports: Home bias in professional sports. 3.Economics of family: Do educated women tend to have fewer children? 4.Economics of education: Does attending lectures help one do better on the final exam? 5.Economics of growth: Estimating Cobb-Douglas production function. 6.Social economics: Do taller people earn higher wages? And if time allows on Monday 7.12 (last lecture) 1.Economics of suicide: Economic crises and excess suicides: Evidence from developed countries. (Regression with panel data, Chapter 10). 2.Labor economics: What makes an entrepreneur? (Regression with binary dependent variable, Chapter 11).

7. Exercises: Timetable 05.11.15 to 08.15-11.00 L10 11.11.15 ke 12.15-15.00 TA102 12.11.15 to 08.15-10.00 L10 18.11.15 ke 12.15-15.00 TA102 19.11.15 to 08.15-11.00 L10 25.11.15 ke 12.15-15.00 TA102 26.11.15 to 08.15-11.00 L10 02.12.15 ke 12.15-15.00 TA102 03.12.15 to 08.15-11.00 L10 09.12.15 ke 12.15-15.00 TA102 10.12.15 to 08.15-11.00 L7

8. EXERCISES: BASICS Each assignment will be graded and you’ll receive points depending on how good your answers are. Performing well enables easier passing of the course. Assignments include written and empirical exercises. Empirical exercises can be done with any software you want to, but I’ll provide instructions in R and EViews. Assignments must be done in groups of 2–3 persons. Answers can be sent via email to santtu.karhinen@oulu.fi or delivered by hand in the beginning of the exercise session. santtu.karhinen@oulu.fi

9. EXERCISES: TIMING First assignment in Noppa on Thursday 29.10. The first assignment is due to the beginning of the first exercise session on Thursday 5.11. at 8.15. On Thursday 5.11., we have our first exercise session, where we will go through the correct answers for the first assignment and I’ll give you the next week’s assignment. I’ll provide you clear written instructions on what you’ll have to do, so you should be able to do them by yourselves. On Wednesday 11.11., we have our first VOLUNTARY tutoring session in computer lab TA102, where you can come and ask if you have any problems regarding that week’s exercises. Again, the second assignment is due Thursday 12.11. at 8.15. On Thursday 12.11., we have our second exercise session, where we will go through the correct answers for the second assignment and I’ll give you the next week’s assignment and instructions. The same pattern continues every week.

10. VOLUNTARY TUTORING SESSIONS In Business School’s computer lab TA102 on Wednesdays 11.11., 18.11., 25.11., 2.12., and 9.12., at 12.15–15.00. Purpose of these sessions is that you can come and ask freely any questions you have regarding the exercises. In case you have problems, you can ask me anytime via email or make an appointment. Participating to tutoring sessions is not mandatory, come only if you have problems.

11. Principles of Econometrics Course grade – Problem sets 50% and final exam 50%. – Final exam 100%.

12. Principles of Econometrics Course description Econometrics can be fun for both teacher and student. An introduction to multiple regression techniques with focus on economic applications. Aim is to teach students to become sophisticated consumers of econometrics – and to do so at a level of mathematics appropriate for an introductory course.

13. Critical consumer of econometrics:The Mozart effect

14. Anything else?