Professor Frank Wolak

Landau Economics 363

e-mail: wolak@stanford.edu
Homepage: http://www.stanford.edu/~wolak

Autumn/Winter Quarter 2009-2010

MWF 11:00-12:50 (Autumn Quarter)
TuThF 1:15-3:05 (Winter Quarter)

Economics 271: Econometrics II

The purpose of this course is to provide students with a working knowledge of linear
econometric models. To this end, the course first studies the properties of the linear regression
model under the classical assumptions. The majority of the course is then devoted to exploring the
implications of potential violations of these assumptionsheteroscedasticity, functional form
misspecification, autocorrelation, omitted variables, and errors-in-variables. Diagnostics for
detecting violations are discussed and econometric remedies are derived. The basic theory of
identification, estimation and inference for linear time series models is also presented. The course
also analyzes models involving systems of linear regression equations, linear panel data methods,
and linear regression models with lagged dependent variables. It provides a general treatment of
linear simultaneous equations models and considers both instrumental variables and maximum
likelihood estimation techniques for these models.
Required Textbook
William H. Greene, Econometric Analysis (6th Edition), Prentice Hall, Upper Saddle River, New
Jersey, 2008.
Supplementary Textbooks
Paul A. Rudd, An Introduction to Classical Econometric Theory, Oxford University Press, New
York , 2000.
Arthur S. Goldberger, A Course in Econometrics, Harvard University Press, 1991. [Highly
Recommended]
Takeshi Amemiya, Advanced Econometrics, Harvard University Press, 1985.
A.C. Harvey, Time Series Models, Halsted Press, 1981.
James D. Hamilton, Time Series Analysis, Princeton University Press, 1994.
BASIC READING LIST
1. The Algebra of Linear Regression Model Estimation(1 Lecture)
Greene, Chapter 2-3
Rudd, Chapters 1-3
Goldberger, Chapters 15-17

2. Linear Conditional Mean versus Best Linear Predictor Function (1 Lecture)

Ruud, Chapter 7
Goldberger, Chapter 5
3. Efficient Estimation of Parameters of Linear Conditional Mean Function (1 Lecture)
Greene, Chapter 4
Ruud, Chapter 9-10
Goldberger Chapter 18-19
4. Restricted Estimation and Hypothesis Testing in the Linear Regression Model (2 Lectures)
Greene, Chapter 5
Amemiya, Chapter 1
Goldberger, Chapters 19-22
Rudd, Chapters 11
5. Large-Sample Estimation and Inference Results for the Linear Regression Model (2 Lectures)
Greene, Chapters 4-5
Amemiya, Chapter 3
Goldberger, Chapter 22
Rudd, Chapter 13
6. Multicollinearity, Proxy Variables, Model Selection, and Errors in Variables (2 Lectures)
Greene, Chapter 4,6, and 7
Goldberger, Chapters 23-25
Rudd, Chapters 20
7. Maximum Likelihood (ML) and Quasi-ML for the Linear Regression Model (2 Lectures)
Greene, Chapter 16
Rudd, Chapter 14-15
8. Generalized Least Squares and Feasible Generalized Least Squares (1 Lecture)
Greene, Chapter 8
Amemiya, Chapter 6
Goldberger, Chapter 27
Rudd, Chapter 18
9. Non-Scalar Covariance Matrices-Heteroskedasticity: Detection and Correction (2 Lectures)
Greene, Chapter 8
Amemiya, Chapter 6
Goldberger, Chapter 28
Rudd, Chapter 18
10. Using Least Squares to Approximate Unknown Conditional Mean Functions (1 Lecture)
Lecture Notes

11. Linear Time Series Models-AR, MA, and ARMA models (3 Lectures)
Greene, Chapter 21
Amemiya, Chapter 5
Goldberger, Chapter 27
Harvey, Chapters 1-2
Hamilton, Chapters 1-3, and 5
Rudd, Chapter 25
12. Non-Scalar Covariance Matrices-Autocorrelation: Detection and Correction (2 Lectures)
Greene, Chapter 19
Amemiya, Chapters 5 and 6
Goldberger, Chapter 28
Rudd, Chapter 19
13. Regressions with Lagged-Dependent Variables (1 Lecture)
Greene, Chapter 20
Amemiya, Chapter 5
Rudd, Chapter 19
14. Seemingly Unrelated Regressions Estimation (1 Lecture)
Greene, Chapter 10
Amemiya, Chapter 6
Goldberger, Chapter 30
Rudd, Chapter 26
15. Simultaneous Equations: Identification and Estimation (3 Lectures)
Greene, Chapters 12-13
Amemiya, Chapter 7
Goldberger, Chapters 31-34
Ruud, Chapter 26
HOMEWORK
There will be 8 problems sets containing both theoretical and empirical problems.
GRADING
Homework
Final Exam

35 percent
65 percent