1. MSF 562 - Econometric Analysis
Summer 2008
Syllabus
Instructor. Andrew P. Acosta
E-mail: aacosta@stuart.iit.edu
Phone: 708-267-8048
Contacting me by email is preferred, and be sure to include MSF 562 in your subject line.
Class Meeting. Wednesday. 6:00 p.m. – 9:15 p.m.
Textbook. Jeffrey M. Wooldridge. Introductory Econometrics: A Modern Approach, 4th Edition,
2008 (ISBN-13: 978-0-324-66054-8)
Course Description. This course presents the major conclusions of the econometric techniques
used in finance. Ordinary least squares, maximum likelihood, generalized method of moments, and
simulation methods are covered. These tools are presented through computer simulation of the
various models, followed by detailed analysis of the distributions of estimators. Hypothesis testing
is covered in detail. Particular attention is placed on the properties of various estimators when
model assumptions do not hold. For students who qualify, a final project applying econometrics
to a financial modeling problem may be chosen. Students not familiar with matrix algebra and
elementary statistics should plan to make up the deficit early in the course. Additional lectures will
be provided for these students.
Course Web Page. We will use the blackboard software to share documents. You can log-in from:
http://blackboard.iit.edu or from http://my.iit.edu.
You should,
• always check for updates to the course, including revisions to notes
• download and try out data and MATLAB functions to get a better understanding of a concept
• make sure to read any announcements.
Software. Proficiency in MATLAB and (to a lesser extent) Excel is required, and continued use
of these tools will be supported throughout the course. Alternative methods for finding solutions,
such as using the R language, Stata, C++, or Python is acceptable, but very little source code (if
any) is provided for study. The document preparation system, LATEX, is strongly encouraged, but
not required.

2. MSF 562 Syllabus 2
Grading. The final grade for the course will be based on the following items,
• Mid-term: 40 %
• Final exam: 40 %
• Final Paper: 20 %
Academic Integrity. This course will adhere to the university’s policy on academic honesty.
Each student is responsible for doing his or her work independently. Anyone found submitting
someone else’s work will be dealt with according to university policy. Cheating or plagiarizing will
result in failing the course.
Final Paper Assignment. This is an opportunity to analyze a relationship among a set of
variables that may help forecast economic conditions. You may find financial numbers published by
a source such as Bloomberg useful as inputs, or you might examine data from the Federal Reserve,
Bureau of Labor Statistics, or OECD. Some sample topics,
• What factors are causing the recent rice inflation?
• How much effect does ethanol demand have on corn futures pricing?
• Which markets are showing the most effects from the recent mortgage credit crisis?
• Which financial ratios, if any, help in forecasting a stock’s future price?
I am looking for econometric analysis with narrative length of 8–10 pages with formatting consistent
with the latest edition of the Chicago Manual of Style. I encourage the use of more than one source,
and properly identified figures and tables. Pay particular attention to the chapter on “Style of
Mathematical Expressions.”
When writing the final project, the use of a technical document layout environment such as
LATEX is strongly preferred, but not required. There is some guidance in chapter 19 of the textbook
on how to prepare an empirical writing project. We will discuss the project in more detail so that
you may prepare it throughout the term.
The most important aspect of this paper is to be able to articulate what your analysis means,
why it is important, and what it implies about the market you analyzed. Therefore, you will want
to convince the reader about some opinion using econometric analysis.
Since it is a final paper, it is due at or before the final exam. If you want a copy of your paper
after I grade it, please attached a self-addressed stamped envelope large enough to send your paper.

3. MSF 562 Syllabus 3
Course Outline
Week 1 Introduction
What is econometric analysis?
Review of statistics and probability
Wooldridge ch 1, Appendixes B – D
Week 2 Cross-Sectional Data Analysis
Introduction to MATLAB, Excel, and AMS-LATEX.
Simple Regression and OLS
Wooldridge ch. 2
Week 3 Multiple Regression Analysis: Estimation & Inference
Hypothesis testing
Wooldridge ch. 3, 4, 6
Week 4 Dummy Variables and Suboptimal Data
Heteroskedasticity
Wooldridge ch. 7, 9
Week 5 Midterm Exam
Week 6 Go over midterm exam
Time Series Data Analysis
Obtaining Data for Analysis: FRED R , Bloomberg, BLS, etc.
Wooldridge ch. 10, 11, 12
Week 7 Reading and Writing Econometric Analysis
Introducing the Final Paper
Wooldridge ch. 19
OECD Report, The subprime crisis: size, deleveraging and some policy options
http://www.oecd.org/dataoecd/36/27/40451721.pdf
Week 8 Panel Data Analysis
Fixed Effects
Wooldridge ch. 13, 14
Week 9 Advanced Time Series
Forecasting
Wooldridge ch. 18
Week 10 Final Exam
Final Paper Due