Econometric Methods with Applications in Business and Economics PDF
Preview Econometric Methods with Applications in Business and Economics
Econometric Methods with Applications in Business and Economics This page intentionally left blank Econometric Methods with Applications in Business and Economics Christiaan Heij Paul de Boer Philip Hans Franses Teun Kloek Herman K. van Dijk 1 3 GreatClarendonStreet,Oxfordox26dp OxfordUniversityPressisadepartmentoftheUniversityofOxford. ItfurtherstheUniversity’sobjectiveofexcellenceinresearch,scholarship, andeducationbypublishingworldwidein OxfordNewYork Auckland CapeTown DaresSalaam HongKong Karachi KualaLumpur Madrid Melbourne MexicoCity Nairobi NewDelhi Shanghai Taipei Toronto Withofficesin Argentina Austria Brazil Chile CzechRepublic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore SouthKorea Switzerland Thailand Turkey Ukraine Vietnam OxfordisaregisteredtrademarkofOxfordUniversityPress intheUKandincertainothercountries PublishedintheUnitedStates byOxfordUniversityPressInc.,NewYork (cid:1)ChristiaanHeij,PauldeBoer,PhilipHansFranses,TeunKloek,andHermanK.vanDijk,2004 Themoralrightsoftheauthorshavebeenasserted DatabaserightOxfordUniversityPress(maker) Firstpublished2004 Allrightsreserved.Nopartofthispublicationmaybereproduced, storedinaretrievalsystem,ortransmitted,inanyformorbyanymeans, withoutthepriorpermissioninwritingofOxfordUniversityPress, orasexpresslypermittedbylaw,orundertermsagreedwiththeappropriate reprographicsrightsorganization.Enquiriesconcerningreproduction outsidethescopeoftheaboveshouldbesenttotheRightsDepartment, OxfordUniversityPress,attheaddressabove Youmustnotcirculatethisbookinanyotherbindingorcover andyoumustimposethesameconditiononanyacquirer BritishLibraryCataloguinginPublicationData Dataavailable LibraryofCongressCataloguinginPublicationData Dataavailable TypesetbySPIPublisherServices,Pondicherry,India PrintedinGreatBritain onacid-freepaperbyAntonyRoweLtd,Chippenham,Wiltshire ISBN0–19–926801–0 3579108642 Preface Econometricmodelsandmethodsareappliedin informationexplosioninbusinessandeconomics the daily practice of virtually all disciplines in (with large data sets—for instance, in finance businessandeconomicslikefinance,marketing, and marketing) and the enormous growth in microeconomics, and macroeconomics. This cheap computing power and user-friendly soft- bookismeantforanyoneinterestedinobtaining wareforawiderangeofeconometricmethods. asolidunderstandingandactiveworkingknow- Thisdevelopmentisreflectedinthebook,asit ledgeofthisfield.Thebookprovidesthereader presentseconometricmethods asacollectionof both with the required insight in econometric veryusefultoolstoaddressissuesinawiderange methods and with the practical training needed ofapplicationareas.Firstofall,studentsshould for successful applications. The guiding learntheessentialsofeconometricsinarigorous principle of the book is to stimulate the reader way,asthisformstheindispensablebasisforall to work actively on examples and exercises, so validpracticalwork.Theseessentialsaretreated that econometrics is learnt the way it works in inChapters1–5,afterwhichtwomajorapplica- practice—that is, practical methods for solving tionareasarediscussedinChapter6(onindivid- questionsinbusinessandeconomics,basedona ual choice data with applications in marketing solid understanding of the underlying methods. and microeconomics) and Chapter 7 (on time In this way the reader gets trained to make the seriesdatawithapplicationsinfinanceandinter- properdecisionsineconometricmodelling. national economics). The Introduction provides This book has grown out of half a century of more information on the motivation and con- experienceinteachingundergraduateeconomet- tents of the book, together with advice for stu- rics at the Econometric Institute in Rotterdam. dentsandinstructors,andtheGuidetotheBook Withthe support of Jan Tinbergen, Henri Theil explainsthestructureanduseofthebook. founded the institute in 1956 and he developed Wethankourstudents,whoalwaysstimulate Econometrics into a full-blown academic pro- our enthusiasm to teach and who make us feel gramme. Originally, econometrics was mostly proudbytheirachievementsintheirlatercareers concernedwithnationalandinternationalmacro- in econometrics, economics, and business man- economicpolicy;therequiredcomputingpower agement. We also thank both current and to estimate econometric models was expensive formermembers oftheEconometric Institutein andscarcelyavailable,sothateconometricswas Rotterdam who have inspired our econometric almost exclusively applied in public (statistical) work. agencies. Much has changed, and nowadays Several people helped us in the process of econometrics finds widespread application in a writing the book and the solutions manual. rich variety of fields. The two major causes First of all we should mention our colleague of this increased role of econometrics are the ZsoltSandorandour(currentandformer)Ph.D. vi Preface students Charles Bos, Lennart Hoogerheide, Arnoud Pijls, and Gerard Voskuil. Special Rutger van Oest, and Bjo¨rn Vroomen, who all thanksareforAlettaHenderiks,whoneverlost contributed substantially in producing the solu- hercourageingivingusthenecessarysecretarial tions manual. Further we thank our (current supportinprocessingthemanuscript.Finallywe andformer)colleaguesattheEconometricInsti- wish to thank the delegates and staff of Oxford tute, Bas Donkers, Rinse Harkema, Johan UniversityPressfortheirassistance,inparticular Kaashoek, Frank Kleibergen, Richard Kleijn, Andrew Schuller, Arthur Attwell, and Hilary Peter Kooiman, Marius Ooms, and Peter Walford. Schotman. We were assisted by our (former) students Arjan van Dijk, Alex Hoogendoorn, ChristiaanHeij,PauldeBoer,PhilipHans andJessedeKlerk,andweobtainedveryhelpful Franses,TeunKloek,HermanK.vanDijk feedback from our students, in particular from Simone Jansen, Martijn de Jong, Marie¨lle Non, Rotterdam,2004 Fromlefttoright:ChristiaanHeij,PauldeBoer,PhilipHansFranses,TeunKloek,andHermanK.vanDijk Contents DetailedContents ix ListofExhibits xvi Abbreviations xix GuidetotheBook xxi Introduction 1 1 ReviewofStatistics 11 2 SimpleRegression 75 3 MultipleRegression 117 4 Non-LinearMethods 187 5 DiagnosticTestsandModelAdjustments 273 6 QualitativeandLimitedDependentVariables 437 7 TimeSeriesandDynamicModels 531 AppendixA.MatrixMethods 723 AppendixB.DataSets 747 Index 773 This page intentionally left blank Detailed Contents ListofExhibits xvi Abbreviations xix GuidetotheBook xxi 1 Introduction 1 Econometrics 1 Purposeofthebook 2 Characteristicfeaturesofthebook 3 Targetaudienceandrequiredbackgroundknowledge 4 Briefcontentsofthebook 4 Studyadvice 5 Teachingsuggestions 6 Somepossiblecoursestructures 8 1 Review of Statistics 11 1.1 Descriptivestatistics 12 1.1.1 Datagraphs 12 1.1.2 Samplestatistics 16 1.2 Randomvariables 20 1.2.1 Singlerandomvariables 20 1.2.2 Jointrandomvariables 23 1.2.3 Probabilitydistributions 29 1.2.4 Normalrandomsamples 35 1.3 Parameterestimation 38 1.3.1 Estimationmethods 38 1.3.2 Statisticalproperties 42 1.3.3 Asymptoticproperties 47 1.4 Testsofhypotheses 55 1.4.1 Sizeandpower 55 1.4.2 Testsformeanandvariance 59 1.4.3 Intervalestimatesandthebootstrap 63
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