Financial Statistic

Shanghai University of Finance & Economics

Introduction to Econometrics

Dr Jin Hongfei

Professor of finance Chairman Department of International Finance Shanghai University of Finance & Economics

1 Lectured by Dr. Hongfei Jin

Shanghai University of Finance & Economics

Outline

• • • • • • What is econometrics Why we study econometrics The methodology of econometrics Types of Data Some application examples Summary

2 Lectured by Dr. Hongfei Jin

Shanghai University of Finance & Economics

What is econometrics

• Literally, “econometrics” means “measurement in economics”

– Too broad a definition to be of any use

• The application of statistical and mathematical methods to analysis of economic data, with a purpose of giving empirical content to economic theories and verifying them or refuting them.

3 Lectured by Dr. Hongfei Jin

Shanghai University of Finance & Economics

Econometrics is an interdisciplinary field

Economics and Business

Statistics

Econometrics

Mathematics

Computer Science

4 Lectured by Dr. Hongfei Jin

Shanghai University of Finance & Economics

Definition of financial econometrics

The application of statistical and mathematical techniques to problems in finance

5 Lectured by Dr. Hongfei Jin

Shanghai University of Finance & Economics

Why we study econometrics

• The quantitative relationship between economic variables is important • The use of math, or logical consistency of theory cannot ensure that economics is a science. ∙

– Economic theory would be useless if the underlying assumptions are wrong. – To be a science, economic theory must be able to: 1.explain historical stylized facts and 2.predict future economic phenomena.

6 Lectured by Dr. Hongfei Jin

Shanghai University of Finance & Economics

Why we study econometrics

• Econometrics is primarily interested in

– Quantifying economic relationships – Testing competing hypothesis – Forecasting

7 Lectured by Dr. Hongfei...