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# Statistics at Chicago Booth inference and eventually culminating

## with linear regression in the final weeks

Chicago Booth is among the world of the quarter. Much of the material is
leaders in quantitative analysis. From similar to a college-level statistics class,
the classroom to the boardroom and in but the pace is considerably faster and
academic research, faculty, students, the emphasis is on understanding over
and alumni take pride in their ability to memorization of formulas.
use data and quantitative skills to solve
Statistics curriculum focuses on the an understanding of the key elements in
concepts underlying quantitative tools, statistical analysis, providing a robust
the issues involved in working with real conceptual foundation that enables
world data, and the thinking required to students to understand, apply, and
put those tools together with data to interpret the results of statistical
draw meaningful conclusions. techniques in any business environment.
Core Courses Applied Regression Analysis (41100)
Chicago Booth students complete at This course provides a thorough
least one statistics course as a part of treatment of linear regression, the most
their degree requirements. Business powerful and widely used statistical tool
Statistics (41000) and Applied in modern business analysis. While
foundation of quantitative training at conceptual foundation, Applied
Booth. Though designed as a two- Regression focuses on issues that arise
course sequence, either course may be in regression analysis with real world
used to fulfill the statistics requirement. data.
Business 41000 and 41100 use Excel
and R or Rstudio as software. The focus in Applied Regression is on a
broad set of examples that illustrate
Business Statistics (41000) practical applications of the linear
regression model. Students will learn
The first course in our statistics how to take a practical problem, such as
sequence, Business Statistics is designed assessing the impact of inventory control
with two broad objectives in mind. on firm profitability, obtain and work
First, it is a ground up statistics class, with data, and design a regression
designed to be accessible to students model to provide a quantitative answer.
with no prior knowledge of statistics. The course also focuses on evaluation of
However, it is also designed to give regression models, and the different
students background in data analysis, issues involved in assessing how well a
probability, and statistics sufficient for model explains outcomes in a given data
all but a handful of upper level elective set versus how well that model will
courses at Booth. predict future outcomes.
To accomplish these goals, the course By providing a diverse array of
begins with data analysis and examples, Applied Regression also
probability, building toward statistical
familiarizes students with the ways in MBA program requirements also permit
which linear regression is employed in one of the elective courses described
different areas of business, including below to be taken in place of Business
terminology and issues specific to Statistics or Replied Regression. This is
finance, marketing, and economics. The strongly discouraged, with the exception
major goal of the course is for students of students who have previously
to become fluent in the language of completed graduate level courses in
regression analysis, which makes for a statistics, empirical economics, or
seamless transition to GSB elective econometrics.
courses as well as modern business
careers. Elective Courses

## Which Course to Take? Chicago Booth currently offers three

elective courses in econometrics and
First year students are often faced with statistics: Data Mining (41201),
a choice between Business Statistics and Analysis of Financial Time Series
Applied Regression Analysis. The two (41202), Financial Econometrics
courses are designed as a sequence: (41203), Statistical Insight into
Although some topics overlap between Marketing, Consulting and
them, the differing approaches Entrepreneurship (41301) .
complement each other and provide a
strong foundation in quantitative Students may obtain a concentration in
analysis. That said, both courses cover Econometrics and Statistics by
linear regression, and either should completing any three statistics courses,
provide sufficient background for most including 41000, 41100, and the
GSB electives. electives described below. These
elective courses focus on applications of
In almost all cases, students are highly statistical analysis to finance,
encouraged to start in Business marketing, and empirical economics,
Statistics. Although the two courses drawing on our facultys research at the
differ more in their approaches than in frontiers of these fields.
their level, Applied Regression assumes
proficiency with standard statistical
tools, including hypothesis tests and Analysis of Financial Time Series
confidence intervals, and an (41202, Professor Ruey Tsay)
understanding of the concepts
underlying those tools. While there is no Financial Time Series introduces
formal criterion, students who can give students to modern methods and
a good answer and explanation to the applications involving time series data,
question, In a large sample of i.i.d. including asset prices, market returns,
observations, what is the sampling and macroeconomic indicators, in the
distribution of the sample mean? will area of finance. The course focuses on
usually feel comfortable in Applied statistical techniques for forecasting,
Regression. volatility modeling, and risk
management, making it ideal for
students with interest in
macroeconomics and all areas of including present value models and bid-
income and financial engineering. frequency (intraday) financial data and
how to use those models to evaluate
The course begins by familiarizing trade execution strategies. The course
students with common characteristics also introduces the statistical tools,
and stylized facts about financial data, including maximum likelihood, robust
such as serial correlation, skewness, and inference, and cointegration analysis,
fat tails in asset returns, and how that are required to understand and
these features differ across asset classes apply these models using financial
(e.g., stocks versus currencies). market data.
Students then learn to estimate and
evaluate dynamic models, both to Students who complete Financial
explain observed phenomena in Econometrics will have a core set of
financial markets, such the relationship tools essential to modern finance
between yields on bonds of differing practitioners as well as an
maturities and day-of-the-week or month understanding of how those tools relate
effects in equity portfolio returns, and to to modern finance theory. This course is
forecast outcomes from quarterly GDP thus an ideal lead-in to upper level
growth to daily stock returns. empirical finance courses.

## Statistical Insight into Marketing,

Financial Econometrics (41303, Consulting, and Entrepreneurship
Professor Jeffrey Russell) (41301, Professor Zvi Gilula)

## This course is about the intersection of Marketing consulting is one of the

finance theory and statistical fastest growing and competitive areas in
techniques. Finance theory produces modern business. This course is meant
models that must be verified or falsified to give future consultants and
with data from real world markets, entrepreneurs important tools and ways
which often requires advanced statistical of thinking that are relevant to insightful
tools. Conversely, statistical analysis of consulting and understanding efficient
facts that are inconsistent with existing
theories, begging for new models or This course addresses a variety of
investment strategies. practical consulting problems and their
solutions, including analysis of customer
The course begins with an overview of attrition, optimal inventory
models of time-varying expected returns management, and the prediction of
and time-varying risk. These models are purchasing behavior using information
then used together to describe the such as media exposure, lifestyle, and
tradeoff between risk and return in a political orientation. The course also
cross section of assets, which is central considers how to measure brand loyalty
to modern portfolio analysis. The latter and the image of a company, as
part of the course covers long run perceived by the public and in particular
relationships between asset prices,
its customers, from observed market
data.

## Statistical tools, for example logistic

regression, are introduced as required.
However, the course is taught in a way
that emphasizes interpretation of results
rather than computations or statistical
theory. Students who have completed
41000 should find this course
quantitatively manageable.

## Data mining: the analysis, exploration,

and simplification of large high-
dimensional datasets. Students will
learn how to model and interpret
complicated Big Data and become
adept at building powerful models for
prediction and classification.

## Techniques covered include an advanced

overview of linear and logistic
regression, model choice and false
discovery rates, multinomial and ordinal
regression, classification, decision trees,
partial least squares and principle
components, factor analysis, clustering
and K-means. We learn both basic
underlying concepts and practical
computational skills.

## Heavy emphasis is placed on analysis of

actual datasets, and on development of
application specific methodology.
Among other examples, we will consider
consumer database mining, internet and
social media tracking, network analysis,
sports analytics, and text mining